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The next government might have to raise tax rates or look for other sources to raise revenues when it presents the full Budget for 2014-15, since the Plan expenditure is not to be retained at the Rs 5.55 lakh crore pegged in the Vote-on-account. Else, it will have to face a higher deficit than the planned 4.1 per cent of gross domestic product for 2014-15.
Officials said the plan expenditure, retained at the Budget Estimate (BE) level of 2013-14, was not feasible for 2014-15. “In the interim Budget, we did not raise plan expenditure deliberately. Non-Plan expenditure is a different thing, since the government has to pay salaries, etc ,” a finance ministry official told Business Standard. The official added if plan expenditure was raised, tax rates might be adjusted accordingly or other sources be examined to raise revenue, if the fiscal deficit had to be retained at 4.1 per cent of GDP.
However, expenditure was cut substantially by Rs 79,790 crore in the revised estimates for 2013-14, about 14.4 per cent lower than the BE for that year. From the RE of 2012-13, the Plan expenditure pegged for 2013-14 represented a rise of 16.8 per cent.
Sticking to precedent, Chidambaram did not tweak general tax rates but gave sector-specific tax sops. He cut excise duties on automobiles, telecom and consumer goods, durable and non-durable, to energise the slowing areas of the economy. This relief is till June 30, if the new government raises tax rates.
Elsewhere, the government is banking on Rs 36,925 crore from disinvestment in 2014-15, according to the interim Budget. In 2012-13, it had pegged Rs 40,000 crore from here but only Rs 16,027 crore is likely. Besides, it had pegged Rs 14,000 crore from residual stake sale in non-government companies, of which only Rs 3,000 is likely. For the next year, residual stake sale in non-government companies (Bharat Aluminium and Hindustan Zinc) are to yield the government Rs 15,000 crore.
On non-tax revenue, the government has pegged dividend and profits at Rs 77,229 crore, a bit lower than the RE of Rs 88,188 crore. So, if the government pushes public sector units to pay a special dividend as it did in the current financial year, this can go a bit higher. But, not by much, add officials.
The government has projected proceeds spectrum sale and one-time licence fees from the telecom sector to yield Rs 38,954 crore in 2014-15 against Rs 41,000 crore in both the BE and RE of FY13. As spectrum proceeds are already staggered over the years, the proceeds on this count might also not be raised by much.
However, the next government might decide to peg the fiscal deficit higher, officials added. It can be kept at 4.2 per cent of GDP, even after abiding by the fiscal consolidation road map. However, this might give only Rs 12,840 crore of leeway to the government.
If the next government announces its own fiscal road map, then it is a different matter, the officials said.
