What Counts in The Vote-On- Account
As anticipated, the vote on account was a non-event, though, I felt that if we leave the legislative changes on the side, there is lots in the fine print.
The allocation of expenditure budget is suggestive of summary of UPA’s achievement besides continuation of flagship social schemes and grand vision.
As the markets had factored, a pleasant surprise was ( over ) achieving fiscal deficit target of 4.8% to 4.6%. It however remains that the QUALITY of deficit is made up due to deferral of plan & non plan expenditure, 48% increase in non-tax revenue and a whooping 64% increase in dividends & profits over the target set out in last year’s budget. Considering that the fiscal target was achieved on the back of subdued tax collection, it could be rated as an achievement. The worry, some part of course from a medium term point is slowness in tax collection despite aggressive tax collections due to high pitched assessments which have become order of the day. Though, not meeting the tax buoyancy didn’t surprise me, excise duty collections has been flat over and that is suggestive of challenges in the manufacturing sector. The gross tax receipts compared to GDP has risen marginally to 10.7 %.
On subsidy bill, it seems that though, there is a desire to curtail the fuel subsidy, the food subsidy is likely to increase and possibly out of control due to electoral promises and mandate under the Food Security Law. The total subsidy bill for 13-14 is likely to run out of control despite petrol deregulation and far exceed the target set out in last budget. Given what has been provided as food subsidy, I expect a huge subsidy bill for 14-15, unless the fuel subsidy is curtailed and experts recommendations on petroleum prices are implemented.
Mention of GST & DTC roll-out in the speech didn’t surprise me, though, he has agreed to put out the reworked DTC for public debate. I anticipate that the new version would see substantial changes. GST would be on the next Governments agenda and would entirely depend on the political mandate as the implementation is contingent upon constitutional amendment. Recommendations of the Tax Administrative Reforms Commission ( TARC) would be keenly awaited though, there was no mention in the interim budget.
Overall, I feel that given where the economy was in 2013 with an impeding fear of down grade, India has travelled some distance in past 10 months and that too with a fractured Parliament. Not just in term of legislative agenda to boost confidence such as The Companies Act, amendment to banking law on voting, passage of pension bill, approval of the insurance bill, transparency in procurement law, land acquisition bill etc. there was lots in terms of boosting FDI by way of greater clarity on FDI in retail, opening up of aviation & power exchanges, 100% FDI in telecom. Similarly, capital markets reform on finalization of policy for granting banking licenses, infrastructure debt funds, inflation index bonds etc. are no mean achievement. However many measures have not yielded the desired outcome due to slowdown in decision making. I had wished that the government has put some if not all the measures in place a year early.
(Views are personal)