Budget 2020 Targets and Challenges by Vivek Kaul

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Budget 2020 Targets and Challenges by Vivek Kaul

06 Feb 2020
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Vivek Kaul

Twitter Handle: शिक्षित बेरोज़गार @kaul_vivek



Revised Estimates for Budget 2020

1. The total personal income tax that the government expects to earn this year is Rs 5.6 lakh crore, a jump of 18.3% from last year. In the first nine months (April to Dec) it has collected Rs 3.18 lakh crore, a jump of 5.1% from last year. This means only 56.8% of the income tax has been collected in the first nine months. More than 43% still remains to be collected in the remaining three months of the year. A surge in personal income tax can be expected anytime.

2. The total corporation tax that the government expects to collect during the year is Rs 6.11 lakh crore. In the first nine months, it has managed to collect, Rs 3.69 lakh crore. This means a little under 40% of the tax still needs to be collected. 

3. The government expects to collect Rs 2.48 lakh crore of excise duties this year. It has collected Rs 1.53 lakh crore in the first nine months. It still needs to collect around 38% of the target in the last three months. As far as gross tax revenues are concerned, the government hopes to earn Rs 21.6 lakh crore during the year. In the first nine months, it has earned Rs 13.8 lakh crore, around 3% lower than what it had earned last year.

4. In the last three months, the government hopes to earn Rs 7.8 lakh crore of gross tax revenue, which is 19% more than what it had earned during the same period lsat year. During the first nine months of the year, tax collections have gone down 3%. In the last three months, the government hopes to earn 19% more than what it did last year.

5. In the first nine months of the year the fiscal deficit has already touched Rs 9.3 lakh crore. The fiscal deficit budgeted is Rs 7.7 lakh crore.This means that the government needs to run a surplus in the last three months, that it's income needs to be more than it's expenditure

Economist Manasi Swami of Centre for Monitoring Indian Economy makes a very interesting point. "The ask is unrealistically high, particularly when tax collections are extremely sluggish and the government does not have much hope on disinvestment." She further points out: "The government’s past performance shows that its accounts were in surplus in March quarter in only four of the last 22 years. And, in these four years, it managed to offset only 3-9 per cent of the deficit incurred in the first three quarters. The FM is expecting March quarter surplus to wipe off as much as 22 per cent of the deficit incurred till December this year."

What this tells us is that there is a big contraction in government spending that has to happen during January to March.This means a contraction in spending of both central and state governments because if central govt doesn't earn, what will share with the state govts. What this tells us is that there is a big big contraction in government spending that has to happen during January to March... This means a contraction in spending of both central and state governments because if central govt doesn't earn, what will share with the state govts. So, nominal GDP growth this year is expected to be around 7.8%. In that environment, the government expects the tax collections to grow by 19%. This implies a tax buoyancy of a whopping 2.4.

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