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.   

So far, both Houses of Parliament have been witnessing disruptions.  At the beginning of the session, 23 Bills were listed for passage, and 20 were listed for introduction.  Two weeks in, one Bill has been passed by both Houses, and three others by Lok Sabha.  These include Bills dealing with the re-haul of consumer protection laws, regulation of surrogacy, and recognition of transgender persons.  Six Bills have been introduced.  These include three Bills which replace the Ordinances currently in force, and a Bill to regulate dam safety.  In this blog, we discuss the key features of some of these Bills. 

Enhancing rights of consumers

The Consumer Protection Bill, 2018 replaces the Consumer Protection Act, 1986.  It was introduced in view of the significant changes in the consumer market landscape since the 1986 Act.  It introduces several new provisions such as enabling consumers to make product liability claims for an injury or harm caused to them, nullifying unfair contracts which impact consumer interests (such as contracts which charge excessive security deposits), and imposing penalties for false and misleading advertisements on manufacturers, as well as on the endorsers of such advertisements. 

The Bill also sets up Consumer Dispute Redressal Commissions (or courts) at the district, state, and national level, to hear complaints on matters related to deficiencies in services or defects in goods.  While these Commissions are also present under the 1986 Act, the Bill increases their pecuniary jurisdiction: District Commissions will hear complaints with a value of up to one crore rupees; State Commissions between one and ten crore rupees; and National Commission above 10 crore rupees.  The Bill also sets up a regulatory body known as the Central Consumer Protection Authority.  This Authority can take certain actions to protect the rights of consumers as a class such as passing orders to recall defective goods from the market, and imposing penalties for false and misleading advertisements. 

Recognising transgender persons and their rights

Last week, Lok Sabha also passed the Transgender Bill, 2018.  This Bill seeks to recognise transgender persons, confers certain rights and entitlements on them related to education, employment, and health, and carves out welfare measures for their benefit.  The Bill defines a transgender person as one whose gender does not match the gender assigned at birth.  It includes trans-men and trans-women, persons with intersex variations, gender-queers, and includes persons having such socio-cultural identities as kinnar, hijra, aravani, and jogta.  The Bill requires every establishment to designate one person as a complaint officer to act on complaints received under the Bill. 

The Bill provides that a transgender person will have the right to self-perceived gender identity.  Further, it also provides for a screening process to obtain a Certificate of Identity, certifying the person as ‘transgender’.  This implies that a transgender person may be allowed to self-identify as transgender individual, but at the same time they must also undergo the screening process to get certified as a transgender.  Therefore, it is unclear how these two provisions of self-identification and an external screening process will reconcile with each other. 

Regulating surrogacy and overhauling the Medical Council of India

The Surrogacy Bill, 2017 which regulates altruistic surrogacy and prohibits commercial surrogacy was also passed in Lok Sabha.  Surrogacy is a process where an intending couple commissions an eligible woman to carry their child.  In an altruistic surrogacy, the surrogate mother is not given any monetary benefit or reward, and the arrangement only covers her medical expenses and health insurance.  The Bill sets out certain conditions for both the intending couple and the surrogate mother to be eligible for surrogacy.  The intending couple must be Indian citizens, be married for at least five years, and at least one of them must be infertile.  The surrogate mother must be a close relative of the couple, must be married and must have had a child of her own.  Further, a surrogate mother cannot provide her own gametes for surrogacy.

The surrogate mother has been given certain rights with regard to the procedure of surrogacy.  These include requiring her written consent to abort the surrogate child, and allowing her to withdraw from the surrogacy at any time before the embryo is implanted in her womb. 

Another key Bill which was listed for passage in Lok Sabha this session but could not be taken up is the National Medical Commission Bill, 2017 (NMC Bill).  Several amendments to this Bill were introduced in Lok Sabha last week.  The NMC Bill seeks to replace the Medical Council of India, with a National Medical Commission.  It introduces a common final year undergraduate medical examination called the National Exit Test which will also grant the license to practice medicine.  Only medical students graduating from a medical institute which is an institute of national importance will be exempted from qualifying this National Exit Test.  The Bill also gives the NMC the power to frame guidelines to decide the fees of up to 50% of seats in private medical colleges and deemed universities.  The NMC may also grant limited license to certain mid-level practitioners connected with the medical profession to practice medicine.  The qualifying criteria for such mid-level practitioners will be determined through regulations, and they may prescribe specified medicines in primary and preventive healthcare. 

Regulating dam safety

The Dam Safety Bill, 2018 was introduced in Lok Sabha and applies to all specified dams across the country.  These are dams with: (i) height more than 15 metres, or (ii) height between 10 metres to 15 metres and subject to certain additional design and structural conditions.  It seeks to provide for the surveillance, inspection, operation and maintenance of specified dams for prevention of dam failure related disasters.  It creates authorities at the national and state level to formulate policies and regulations on dam safety and implement them.  It also puts certain obligations on dam owners by requiring them to provide a dam safety unit in each dam, among other things. 

When the Bill was being introduced, few opposition members raised objections on the grounds of Parliament’s legislative competence to make a law on dam safety which applies to all states.  They gave the example of the previous Dam Safety Bill, 2010, which applied only to the states of Andhra Pradesh and West Bengal who had adopted resolutions requiring Parliament to pass a law on dam safety.

So far the winter session has seen poor productivity with Lok Sabha working for 14% of its scheduled time, and Rajya Sabha for 5%.  This is one of the least productive sessions of the 16th Lok Sabha.  This is also the last major session before the dissolution of the 16th Lok Sabha.  Both Houses will meet tomorrow after the Christmas break.  With a packed legislative agenda, it is essential for Parliament to function in order to discuss and deliberate the Bills listed.  However, with a limited number of sitting days available in the ongoing session and continued disruptions, it remains to be seen if Parliament will be able to achieve its legislative agenda.

- This post is a modified version of an article published by The Wire on December 26, 2018.