Today, a general discussion on the Union Budget 2020-21 is being held in both Houses of Parliament.  In the budget, the government presented the estimates of the money it expects to spend on various ministries, and how much money will be raised from different sources such as levy of taxes and dividends from public enterprises in 2020-21.  In addition, the budget presented the revised estimates made by the government for the year 2019-20 in comparison to the estimates it had given to Parliament in the previous year’s budget.  The budget also gave an account of how much money the government actually raised and spent in 2018-19.  

What are revised estimates?

Some of the estimates made by the government might change during the course of the year.  For instance, once the year gets underway, some ministries may need more funds than what was actually allocated to them in the budget, or the receipts expected from certain sources might change.  Such deviations from the budget estimates get reflected in the figures released by the government at later stages as part of the subsequent budgets.  Once the year ends, the actual numbers are audited by the Comptroller and Auditor General of India (CAG), post which they are presented to Parliament with the upcoming budget, i.e. two years after the estimates are made.

For instance, estimates for the year 2019-20 were presented as part of the 2019-20 budget in July 2019.  In the 2020-21 budget (February 2020), the government presented 2019-20’s revised estimates based on the actual receipts and expenditure accounted so far during the year and estimations made for the remaining 2-3 months.

Is there a way to find out the government’s actual receipts or expenditure mid-year?

The actual receipts and expenditure accounts of the central government are maintained by the Controller General of Accounts (CGA), Ministry of Finance on a monthly basis.  On January 31, 2020, the CGA updated the accounts figures for the period April to December 2019.  Thus, we have unaudited actuals for the first nine months of the financial year.

How do the actual figures for the year 2019-20 so far compare with the revised estimates?

Table 1 gives the revised estimates presented by the central government for the year 2019-20 and the monthly account figures maintained by the CGA for the nine-month period April to December 2019.  The difference between these two figures gives us the three-month target that the government will have to meet by March 2020 to reach its revised estimates.    

Till December 2019, the government has spent Rs 21.1 lakh crore, which is 78% of the revised estimates for 2019-20.  While the expenditure has reached 78% of the target, so far, the government has been able to generate only Rs 11.8 lakh crore or 61% of the receipts (excluding borrowings) for the year 2019-20.  This implies that the receipts will have to grow at a rate of 41% in the three-month period January-March 2020 to meet the revised estimates of Rs 19.3 lakh crore.   So far, receipts have grown at a rate of 4%.

Table 1:  Budget at a Glance – Comparison of 2019-20 revised estimates with Apr-Dec 2019 figures (Rs crore)

Budget

at a Glance

Actuals

Revised

Nine-month period

Three-month target

Growth rate so far

Growth target

2018-19

2019-20

Apr-Dec 2019

Jan-Mar 2020

% change
  (Apr-Dec 2018 to Apr-Dec 2019) 

% change
  (Jan-Mar 2019 to Jan-Mar 2020) 

Revenue Expenditure

20,07,399

23,49,645

18,54,125

4,95,520

14%

28%

Capital Expenditure

3,07,714

3,48,907

2,55,522

93,385

21%

-3%

Total Expenditure

23,15,113

26,98,552

21,09,647

5,88,905

15%

22%

Revenue Receipts

15,52,916

18,50,101

11,46,897

7,03,204

6%

50%

Capital Receipts

1,12,779

81,605

31,025

50,580

-33%

-24%

of which Disinvestment

94,727

65,000

18,100

46,900

-47%

-22%

Total Receipts (without borrowings)

16,65,695

19,31,706

11,77,922

7,53,784

4%

41%

Revenue Deficit

4,54,483

4,99,544

7,07,228

-2,07,684

   

Fiscal Deficit

6,49,418

7,66,846

9,31,725

-1,64,879

 

 

Primary Deficit

66,770

1,41,741

5,07,411

-3,65,670

   

Sources:  Union Budget 2020-21; Controller General of Accounts, Ministry of Finance; PRS.

How do the actual tax receipts fare in comparison to the revised estimates of 2019-20?

A lower than estimated growth in nominal GDP has also affected the tax receipts of the government during the year. The 2019-20 budget estimated the nominal GDP to grow at 12% over the previous year, whereas the latest estimates suggest this growth rate to be 7.5% in 2019-20.  The revised estimates for 2019-20 show gross tax receipts of Rs 21.6 lakh crore (includes states’ share).  Till December 2019, tax receipts of Rs 13.8 lakh crore has been collected, which is 64% of the target.  The tax receipts will have to grow at 19% in the three-month period January-March 2020 to meet the target.  Table 2 shows similar comparison for the various taxes and also for the tax receipts devolved to states.  While the budget estimated a growth in receipts from all major taxes, receipts from taxes such as corporation tax (-14%), union excise duties (-2%), and customs (-12%) have declined during the period Apr-Dec 2019.

Table 2:  Tax receipts – Comparison of 2019-20 revised estimates with Apr-Dec 2019 figures (Rs crore)

Revenue

Receipts

Actuals

Revised

Nine-month period

Three-month target

Growth rate so far

Growth target

2018-19

2019-20

Apr-Dec 2019

Jan-Mar 2020

% change
  (Apr-Dec 2018 to Apr-Dec 2019) 

% change
  (Jan-Mar 2019 to Jan-Mar 2020) 

Gross Tax Revenue

20,80,465

21,63,423

13,83,035

7,80,388

-3%

19%

Devolution to States

7,61,454

6,56,046

4,76,113

1,79,933

-2%

-34%

Net Tax Revenue

13,17,211

15,04,587

9,04,944

5,99,643

-3%

57%

Dividend and Profits

1,13,420

1,99,893

1,61,979

37,914

175%

-30%

Other Non-tax Revenue

1,22,284

1,45,620

79,974

65,646

-10%

96%

Revenue Receipts

15,52,916

18,50,101

11,46,897

7,03,204

6%

50%

Note:  Figures for income tax exclude receipts from the Securities Transaction Tax.

Sources:  Receipts Budget, Union Budget 2019-20; Controller General of Accounts, Ministry of Finance; PRS.

If we look at sources of receipts other than taxes, non-tax revenue during Apr-Dec 2019 is Rs 2.4 lakh crore, i.e. 69% of the estimated Rs 3.5 lakh crore.  Disinvestment receipts till date amounted to Rs 18,100 crore, i.e. 17% of the budget target of Rs 1.05 lakh crore.  Though the investment target has been revised down to Rs 65,000 crore, it implies that Rs 47,000 crore would need to be raised in the next two months.    

How does this impact the borrowings of the government?

When the expenditure planned by the government is more than its receipts, the government finances this gap through borrowings.  This gap is known as fiscal deficit and equals the borrowings required to be made for that year.  Given lower than expected receipts, the government has had to borrow more money than it had planned for.  Borrowings or fiscal deficit of the government, till December 2019, stands at Rs 9.3 lakh crore, which is 22% higher than the revised estimate of Rs 7.7 lakh crore.  Note that with three months still remaining in the financial year, fiscal deficit may further increase, in case receipts are less than expenditure.

When we look at fiscal deficit as a percentage of GDP, the 2019-20 budget estimated the fiscal deficit to be at 3.3% of GDP.  This has been revised upward to 3.8% of GDP.  However, till December 2019, fiscal deficit for the year 2019-20 stands at 4.6% of GDP (taking the latest available GDP figures into account, i.e. the First Advance Estimates for 2019-20 released in January 2020).  This increase in fiscal deficit as a percentage of GDP is because of two reasons: (i) an increase in borrowings as compared to the budget estimates, and (ii) a decrease in GDP as compared to the estimate made in the budget.  The latter is due to a lower than estimated growth in nominal GDP for the year 2019-20.   The 2019-20 budget estimated the nominal GDP to grow at 12% over the previous year, whereas the latest estimates suggest this growth rate to be 7.5% in 2019-20.

Note that, in addition to the expenditure shown in the budget, the government also spends through extra budgetary resources. These resources are raised by issuing bonds and through loans from the National Small Savings Fund (NSSF).  The revised estimates for 2019-20 show an expenditure of Rs 1,72,699 crore through such extra-budgetary resources. This includes an expenditure of Rs 1,10,000 crore by the Food Corporation of India financed through loans from NSSF. Since funds borrowed for such expenditure remain outside the budget, they do not get factored in the deficit and debt figures.  If borrowings made in the form of extra-budgetary resources are also taken into account, the fiscal deficit estimated for the year 2019-20 would increase from 3.8% of GDP to 4.6% of GDP due to extra-budgetary borrowings of Rs 1,72,699 crore.  This does not account for further slippage if the targeted revenue does not materialise.   

The elections for the next Vice-President of India are underway today.  The current Vice President Dr. Hamid Ansari will complete his second five-year term on August 10, which is in a few days.  While the BJP-led NDA’s candidate is Mr. Venkaiah Naidu, Dr. Gopalkrishna Gandhi is the joint candidate fronted by 18 opposition parties led by the INC.  In this post, we take a closer look at the constitutional mandate and role of the Vice-President of India and how the elections for the post will play out today.

Constitutional mandate as Vice President

The Vice-President is the second-highest constitutional office in India.  He acts as the President in the absence of the incumbent President, and is the ex officio Chairman of Rajya Sabha.  As an indication of his bipartisanship and apolitical character, the Vice-President does not hold membership of any political party or any other office of profit.   Further, given his constitutional stature, the statements given by the Vice President assume national significance.  The outgoing Vice President’s statements on issues like press freedom and welfare of minority communities led to several media debates and attracted widespread attention.

Vice-President’s role as Chairman of the Rajya Sabha

As Chairman of Rajya Sabha, the Vice President is the final authority on the interpretation of the Constitution and the Rules of Procedure for all house-related matters.  His rulings constitute binding precedent.  He also determines whether a Rajya Sabha member stands to be disqualified on grounds of defection.  Such powers make him an important stakeholder in the functioning of our parliamentary democracy.

The Vice President is also vested with powers to improve the functioning of the Upper House.  There have been several instances where the current Vice President has used his powers to address issues ranging from improving the productivity of question hour, reducing prolonged disruptions, maintaining decorum in the House, to facilitating discussion on issues of national importance.

Addressing disruptions: In March 2010, the Vice President ordered seven MPs to be evicted from the House for causing disruptions during the discussion and passage of the Women’s Reservation Bill.  More recently, in December 2015, the Vice President called for an all-party meeting during the last leg of the then ongoing Winter Session to discuss the matter of continuous disruptions in the House.  The remaining three days of the session after the all-party meet recorded 79% productivity, while the House had recorded overall productivity of 51% that session.

Functioning of Question Hour: In another instance, in November 2014, the Vice President issued a direction to conduct question hour from 12 noon to 1 pm instead of the originally allocated first hour of the day.  This was seen as an attempt to address the issue of low productivity of question hour mostly due to disruptions at the start of the day. However, question hour productivity has not shown any significant improvement yet, with continuing disruptions.

Parliamentary Privilege: Parliamentary privilege refers to rights and immunity enjoyed by Parliament and MPs, which may be necessary to effectively discharge their constitutional functions.  When disregarded, the offence is called a breach of privilege and is punishable under law. The Chairman is the guardian of these privileges and can also issue warrants to execute the orders of the House, where necessary.  In 1967, one person was held to be in contempt of Rajya Sabha for throwing leaflets from the visitors’ gallery of the House.  The then Vice President, in accordance with the resolution of the House, had sentenced the person to simple imprisonment, till the conclusion of that session.

The Chairman’s consent is required to raise a question of breach of privilege.  He also has the discretion whether to refer it to the Privileges Committee, and whether to accept the committee’s recommendations.  In October 2015, the current Vice President had referred the matter of a member’s controversial “terrorists in Parliament” remark to the Privileges Committee upon receiving complaints from several opposition MPs.

Role in Parliamentary Committees and other institutions

Parliamentary committees review proposed laws, oversee activities of the executive, and scrutinise government’s expenditure.  The Vice President nominates members to various Parliamentary Committees, appoints their Chairmen and issues directions to them.  The Vice President also nominates members of the Rajya Sabha on various bodies such as the Haj Committee, the Institute of Constitutional and Parliamentary Studies, Courts of several universities such as JNU, etc. He is also on the three-member Committee which nominates the Chairman of the Press Council of India.

So, how is the Vice President elected?

Unlike Presidential elections, MLAs do not have a vote in these elections.  Dr. B R Ambedkar had explained why during the constituent assembly debates: “The President is the Head of the State and his powers extend both to the administration by the centre as well as of the states… But when we come to the Vice-President, his normal functions are merely to preside over the Council of States.  It is only on a rare occasion, and that too for a temporary period, that he may be called upon to assume the duties of a President”.

Therefore, the Electoral College for the Vice- Presidential elections consists of all 790 MPs.  The elections are conducted using the system of single transferable voting that results in (approximately) proportional representation.  The voting is done through secret ballot implying that parties cannot issue whips to their MPs and anti-defection laws do not apply.

Each voter has one vote with the same value of 1.  Every voter can mark as many preferences, as there are candidates contesting the election.  It is necessary for at least the first preference to be marked.  A candidate needs to win a required number of votes (or the quota) to be elected.  If no one achieves the required quota after the first round of counting the first preference votes, the candidate with the lowest votes is eliminated.  His votes are then transferred to the second preference mentioned (if any) on the votes he received.  If no one achieves the required quota again, the process is repeated till either:

  1. a candidate achieves the required quota, or
  2. all candidates, except one, are eliminated.

The upcoming Vice Presidential elections

Let us now determine the quota required for victory in today’s election. The total value of votes of the electoral college is divided by two, and one is added (to ensure a majority) to the quotient to determine the quota. Hence, the quota is calculated as:

Quota    = 790/2 + 1 = 395 + 1= 396

The candidate who gets 396 votes will win the election.  If no candidate gets to this mark, the second and further preferences may be counted until the mark is reached or all candidates, but one, are eliminated.

We know the number of seats held by each party in Parliament. Let us assume that all MPs vote along their party line.  The position of the NDA and UPA is depicted in the figure below at the two ends of the chart.  All other major parties and independents are marked in the middle.

VP quota

We observe that, while the BJP falls short of the quota by 58 votes, the shortfall can be overcome if NDA allies TDP, Shiv Sena, Shiromani Akali Dal, LJP and PDP support its candidate.

With the voting taking place this morning, the outcome and results will become clear by later today.  It is hoped that the new Vice President will uphold the twin constitutional mandates as the second highest constitutional functionary and the Chairman of Rajya Sabha, just as his distinguished predecessors have done.