Budget 2019: Confusion over assumed GDP, says India Ratings' Devendra Pant

There is confusion over assumed GDP growth in FY20. While the Budget at a Glance (BAG) pegs FY20 nominal GDP growth at 12 per cent, the section on macro-economic framework puts it at 11 per cent. Moreover, FY19 GDP in BAG is different from the Central Statistical Office’s estimate.

FY19 provisional estimates for revenue are now available. It is perplexing that the Budget hasn’t used these numbers for FY20 estimates and relied on FY19 (RE) in the interim Budget. Gross tax revenues are budgeted to grow 9.5 per cent in FY20 based on FY19 (RE).

Devendra Pant

However, if one factors in FY19 provisional numbers, it comes to 18.3 per cent (FY19 provisional over FY18: 8.4 per cent). The maximum variation in growth is in income tax, followed by excise duties and customs. Tax revenue may fall short by around Rs 1.5 trillion from FY20 (BE). This would be similar to a tax revenue shortfall observed in FY19 (provisional). 

Expenditure growth appears to be more balanced than FY19 (RE). However,  provisional estimates show that FY19 revenue expenditure was Rs 1.3 trillion lower than FY19 (RE). Revenue expenditure is  committed in nature and it is difficult to reduce it by 6.2 per cent in a year, most of this was likely to be rolled over from FY19 to FY20, as has been done in the past.