The NDA finance minister Arun Jaitley has not only accepted the UPA finance minister P Chidambaram’s fiscal deficit target of 4.1% of the GDP, fixed in the interim budget for FY15, as a challenge, going by the ground realities, he has also embraced the jugaad fiscal management of the previous government. Unlike the fiscal consolidation achieved during FY05-FY08, led by growth in tax revenue, the current phase of fiscal consolidation is forced by the slowdown in growth with tax revenue mop-up failing to meet the target. The strategy behind the current fiscal consolidation is: squeeze expenditure and garner additional revenue from other sources such as disinvestment and the non-tax segments.
The tax collection growth for FY15 is pegged at 19.8% over the actuals of FY14 but the important point here is, it is only 10.4% more than the budget estimate of FY14. The target for FY15 is based on a 6% GDP-growth assumption. It could be anybody’s guess how credible this target is in the backdrop of a poor monsoon and sub-5% growth in the last two financial years.
In contrast, the non-tax revenue pie—interest and dividend receipts, issue of passport and visa, registration of companies, patents and license fees, royalty from offshore oil fields, profit petroleum and various receipts from telecom sector—is growing substantially. According to medium-term fiscal policy statement, in FY14, a total of R1,99,233 crore was realised on this count, recording a growth of 45% over FY13, and contributing 1.7% of GDP. It is estimated at R2,12,505 crore in FY15, a growth of 6.7% over the FY14 figure. The major components contributing to this growth are spectrum charges, unlocking of funds in the public account and increase in dividend paid by RBI. How significant the non-tax revenues have become can be gauged from the fact that they have become comparable to the three components of indirect taxes—excise duties, custom duties and service tax.
The government’s eagerness in resource mobilisation for FY15 from the non-tax side is evident from the fact there is hardly any possible area which has not been tapped. An amount of R12,252 crore lying unused in various funds such as National Clean Energy Fund, Central Road Fund, Prarambhik Shiksha Kosh, Social and Infrastructure Development Fund and Guarantee Redemption Fund have been submerged into the Budget.
Then, the disinvestment target has also been raised to R63,425 crore from the