Did Finance Minister Nirmala Sitharaman’s Budget documents mislead Parliament? Some economists and analysts claim so, pointing to a huge gap in figures listed in the Economic Survey – a document presented the day before the Budget – and the Budget itself. There are differences of more than Rs 1.5 lakh crore in both the expenditure and revenue figures of these two documents. How could that be possible?
First it is important to understand what each of these are.
Budgets tend to end up with three different figures for each item, over time.
- At first, you get the Budget Estimate, which is how much money the government allocates or expects to earn when it presents the Budget proposal.
- Then in subsequent documents you get the Revised Estimate, which is a mid-year estimate that usually takes into account trends based on spending or revenue for about six months, and how much that deviates from the original Budget Estimate.
- Finally, you have the Actuals, which are the complete receipts for spending or revenue after the full year is over. The Controller General of Accounts provides these numbers, which offer the most accurate picture of what the Indian government’s actual expenditure or income looks like.
In the Economic Survey, which was tabled in Parliament a day before the Budget, the data for the previous year – Fiscal Year 2018-’19 – is based on the the provisional Actuals, provided by the Controller General of Accounts. In other words, these are the most recent and accurate numbers about what was spent and earned by the Indian government.
In the Budget, however, the government has used the Revised Estimate, which was generated six months ago and also used in the Interim Budget in February. This means that the Budget actually uses older and less accurate data than the Economic Survey and, apparently, the finance ministry made decisions and projections based on that.
It is this choice that has led to a gap in the two numbers. Tax revenue figures for 2018-’19, for example, are about Rs 1.65 lakh lower in the Economic Survey than the Budget. Similarly, government expenditure for the previous year was also about Rs 1.47 lakh lower in the Economic Survey than in the Budget.
That is a huge difference between the two documents.
It suggests that the Indian government spent much less in 2018-’19 than was expected, and that it also received a lot less in revenue than was budgeted for. It also leads to fears that the assumptions made by the government for the current year, 2019-’20, are based on flawed figures. Some analysts have even suggested that the government needs to present a new budget with the more accurate figures.
The question that arises is why the government would willingly use older, less-accurate figures when there is better data available.
One reason could be that the older numbers look better. This government has been singled out by everyone from the Opposition to foreign economists to its own former Chief Economic Adviser to the Comptroller and Auditor General for not providing accurate numbers to the public. So this theory is not beyond the pale.
But another could be that this is the way it is always done: post-election Budgets use the Revised Estimates, and not provisional Actuals. Analyst Vivek Kaul looked into this and found that the same process was followed in 2014 and 2009, the last two times there was a post-election Budget following an interim one. In other words, the current government has not broken from tradition.
The real concern
The difference, however, is that this time there is a much larger gap between figures in the Revised Estimates and the Actuals, compared to 2009 and 2014. And so, partly thanks to the current government’s terrible record at being transparent with data, the gap is being interpreted as not just a procedural oddity but also an intentional dodge.
One can only hope that the finance ministry, even if it presented older data to the Parliament, made its assumptions about this year’s Budget based on the most recent statistics it had access to.
The question isn’t really about why the government hasn’t presented the most recent numbers. It is this: why was there such a large discrepancy in the first place? And have our policy-makers taken note of this?
The most recent data, used in the Economic Survey, reveals a government apparatus that spent and earned much less than it has expected to, by a huge amount. That is about as good a sign of an economy in danger as any. Rathin Roy, an economist who sits on the Prime Minister’s Economic Advisory Council, even called it a “fiscal crisis”.
The Budget, even in its current form using older figures, has made extremely optimistic projections for this year. If you factor in the more recent data, some of those assumptions seem to expect an economic miracle.
Considering every indication suggests the economy is slowing down, and that the Budget does not provide any fresh ideas to arrest this slide, should India prepare for yet another year in which actual figures will deviate massively (and disturbingly) from what the government was hoping to achieve?