The annual financial statement, popularity known as Budget for the year 2019-20 seems to have lost its constitutional authority and financial sanctity with historical interventions and frequent changes in the post- budget months. The Budget was delayed and shifted to June-July session instead of March due to the general election this year.
The annual financial statement with constitutional obligation under Article 112, though passed with Parliamentary procedure, having speculative figures of income and expenditure of the union Government, was supposed to follow certain financial sanctity, certain beliefs and laws. All stakeholders of the budget, particularly the citizens, believe that the budget, if necessary, is supplemented with addition or deduction in its original figures once or twice within the same year as provided under Article 115. Economists too, analyse policy and figures of the budget and the provisions under the Fiscal Responsibility and Budget Management (FRBM) Act 2003, passed by the Parliament, of which Government is the executive instrument. But to everyone’s surprise, historical events occurred when the Finance Minister made an off-Parliament speech in the post-budget months more than once, indicating many important structural changes in the original one.
At least twice, Union Finance Minister Nirmala Sitharaman gave hour-long deliberations in press conferences, which, many watchers describe as a ‘mini budget’ speech. The annual financial statement for a year consists of two separate entities, part A and B of which “Taxation Bill” is the most important component. The expenditure policies and programmes announced by the Government usually depend on the income, both from direct and indirect taxes.
The finance minister’s post-Budget speeches speak of a lot of changes both in indirect and direct tax collection. GST rates have been revised without taking care of revenue neutralisation. It would definitely reduce the state’s collection and as per the provisions of compensation, the entire loss burden would be on the Union Budget.
The effective corporate tax, as has been announced, is 25.17% against 34.95% taken in the earlier budget. Other stimulus or tax concession for new domestic companies would be implemented on or after October 2019. All these new companies will pay at the rate of 15% tax. The impact of all these concessions will definitely reduce the programme expenditure and Government is compelled to keep the deficit in control through slow progress with low investment in public expenditure. Economists estimate that this year’s annual financial pressure on the budget is expected to be more than Rs. 1.45 lakh crore, due to changes in tax structure.
Without taking the Parliament into confidence, the union Government, in the post-budget period, has made five big announcements, such as (i) withdrawal of surcharge from corporate investment, (ii) FDI entry (100%) in the coal sector (iii) merger of banks. (iv) corporate tax reduction and (v) cut in GST rates.
Economists expect that perhaps the shortfall will be managed with funding out of RBI’s transfer of Rs.1.76 lakh crore. Details of this large transfer are still not known.
It is estimated that this year’s fiscal deficit may cross 4%, which is more than the Budget speculation of 3.3%. It is a clear violation of the FRBM Act, if all the programmes announced, are faithfully executed.
All this together, is a deliberate attempt to avoid the Parliament and is expected to be executed through ordinance. It leads to taking out privileges of the House and destroy both constitutional obligations and operational sanctity and again amplifies the slogan that everything is historical.
Any violation in the economics of the budget or maneuvering arithmetic used in the annual accounting procedure would end in destabilised hopes and aspirations incorporated in the annual fiscal system. It may also lead to loss of confidence in all probable sectors and investors involved in developing the economy.
[The writer is a former Minister]
[Disclaimer: The views expressed by the writer are his own and do not necessarily represent that of the website]