Tax buoyancy cannot continue year after year, says DEA secy Ajay Seth

Economic Affairs Secretary Ajay Seth spoke on the government's thinking behind the major budget projections and the fiscal math

A day after the Interim Budget was tabled in the Parliament, Economic Affairs Secretary Ajay Seth spoke to Ruchika Chitravanshi and Asit Ranjan Mishra on the government’s thinking behind the major budget projections and the fiscal math. Edited excerpts: 

Tax revenue projections show a conservative budgeting. The buoyancy has been reduced from 1.4 in FY24 to 1.1 for the next year. Can you explain the thinking behind this? 

I have treated FY23-24 as the first year where all segments are doing well. In 2022-23, there were still a few areas that were coming out of the impact of the pandemic. In FY23-24, the profitability of the corporate sector and the general economy, which is reflected more through the GST numbers, are doing well. We expect buoyancy to continue next year, but it cannot continue year after year. It (the revenue projection) arises out of all sectors doing well and the formalisation of the economy helps in making sure the tax domain gets widened. 

Non-tax revenue has projected a growth of 6 per cent. What is the underlying assumption for this projection?

The major non-tax revenues include disinvestment, dividends from banks, PSUs, RBI, and spectrum charges. They account for almost 80-85 per cent of the non-tax revenue. We have an interaction with each of the stakeholders and that is how we arrive at the number. We think it is a reasonable number. 

There is a decline of 8 per cent in the subsidy bill. Why is it so?

You have to look at it from what base we are coming from. A large portion is on fertiliser prices. These are the estimates based on the current prices as well as the outlook for the next year. It is not as if fertiliser consumption is coming down, it is a question of the price. Prices had shot up during the post-pandemic period. 

Why is there no specific target for disinvestment in this budget?

It is a combination that has been put through. Instead of looking at the disinvestment and monetisation as a separate basket, those have been looked at together and that is how a combined number has been indicated in the budget document. Monetisation has two kinds of flows -- one which comes to the PSU or the agencies such as NHAI and they plough back to their future investment. There will be certain monetisation that will come through the sale of securities, and physical assets. There have been years where monetisation proceeds have been more than estimated and vice versa might have been for disinvestment. We felt it was better to have a combined number. 

When is the white paper being tabled and what are the broad parameters?

It will come next week. It will be laid on the table of the house. It is a work in progress. 

When will the high-level committee on population and its mandate be finalised?

Population control and demographic changes are both challenges and opportunities. We will have a comprehensive look at it and come up with the recommendations. I cannot put a timeline on it. There is a clear thought process. 

The Economics Division in the ‘Indian Economy Review’ has estimated a 7 per cent growth rate. Is it achievable?

It is a doable number. We have said that there is potential to do even better. 

Does the 10.5 nominal growth factor in 7 per cent real growth?

For budget purposes, it is the nominal growth of the economy that is relevant. Real growth of the economy is relevant from the perspective of economic management and development. These are two different tasks. For the budget number estimation, 10.5 per cent is a reasonable number.  

How much money will be raised through green bonds in the next fiscal?

The final decision will be taken when we announce the calendar by the end of March. We will indicate the firm number so the market has advance information. We, however, intend to raise it in the second half of FY25.