Vol. XLIII No. 28 July 14, 2019

The Numbers the Finance Minister Does Not Want You to See

Jayati Ghosh

ONE of the most startling aspects of Finance Minister Nirmala Sitharaman’s speech is that it did not provide the numbers that are the basic reason for having a budget speech in the first place: the numbers relating to overall revenues and expenditure of the government, either for the previous year or for the current year. This was widely commented on, and the FM’s response was that all these numbers are available in the supplementary material provided in the budget documents, so there is no need to go into them in the speech.

But most people do not go through the supplementary material, and that is probably the real reason why the FM chose to avoid such numbers altogether in her speech. Because it turns out that the numbers given in the documents – at least as far as the revenues and expenditure of the previous year (2018-19) are concerned – are not just misleading but actually false!

 The proof of this comes in the finance ministry’s own Economic Survey of 2018-19. In this year’s Economic Survey, Volume II contains a Statistical Appendix, in which Table 2.5 on Page A59 provides the receipts and expenditure of the central government. The last column of this table provides the provisional Actuals – that is to say, the real amounts as per the finance ministry’s own calculations – for the year 2018-19. (Since this Survey was brought out in July, rather than in February or March, it gave ample time for the ministry to record the actual receipts and spending of the fiscal year that ended on March 31, 2019.)

The results are devastating, because they reveal massive shortfalls and discrepancies in both receipts and expenditures – WHICH ARE NOT REFLECTED IN THE ACTUAL BUDGET DOCUMENTS. In other words, we cannot believe most of the numbers stated as the “Revised Estimates” for 2018-19, because they do not tally with the government’s own estimated of actual revenues and expenditure in that year, as shown in the Economic Survey.

The biggest discrepancy – and shortfall – is in the tax revenues retained by the centre, which were actually lower than the Revised Estimates by a whopping  Rs 165,176 crore, or as much as 13.5 per cent of the revised estimates of total tax revenues. This was presumably largely because of the well-known shortfall in GST collections. The central government managed this essentially by containing its own expenditure, so that the actual total expenditure was actually lower than the revised estimate by as much as Rs 145,813 crore, or 13.4 per cent. The entire budget shrank massively – but none of this is reflected in the budget statements provided to the public!

This has many implications. For one, according to the provisional actual figures of receipts and spending, the fiscal deficit was greater than stated in the revised estimate by Rs 10,963 crore, so that it amounted to 3.45 per cent of GDP rather than 3.3 per cent as is being claimed.

But that is a rather minor matter compared to the more serious issue that if these Provisional Actual figures are to be believed, than none of the revised estimates for 2018-19 are correct. This has particularly serious implications for the past pattern of spending. Obviously, very significant cuts were made to public spending last year in the wake of the decline in tax revenues, which continue to reflect the disastrous GST implementation. But how do we know which items of expenditure were curtailed, and by how much?

Is this not essential for parliament and the general public to know? When a budget is passed by parliament, the debate and discussion are essentially about allocations – so if the government has unilaterally made swingeing cuts to particular items of expenditure, these MUST be brought to public notice.

Providing the earlier revised estimates without openly stating the more correct provisional actual figures, is more than just nonchalance or disrespect – it amounts to lying before parliament and the people. How can we trust any numbers coming out of the government if this is the cavalier and even offensive manner in which they choose to hide the truth?