If everything is so hunky dory as claimed by Jaitley, why is the government finding it hard to meet the fiscal deficit figure? Why does the government want RBI money?
The government seems to have become a revenue-guzzling monster whose hunger for money never abates. International crude prices go down, but Finance Minister Arun Jaitley doesn’t pass the benefit to the consumer; instead, his Ministry begins to fleece the people—and hurt the economy as there are cascading effects—by increasing taxes. Then the managers of economy extort money from public sector entities to bail themselves out. There is scarcely any relief for income-tax payers. And now the government wants to snatch money from the Reserve Bank of India as well.
Jaitley keeps telling fairy tales not just on the social sector but also rural India. The government couldn’t spend money and resources to stop crop burning in north India, and yet the Honorable Minister talks about buoyancy in tax collection.
The government reportedly wants the Reserve Bank of India (RBI) to transfer Rs.3.6 lakh crore to it so that it could dress up its finances. Economic Affairs Secretary Subhash Chandra Garg has denied this in a tweet: “A lot of misinformed speculation is going around in the media. Government’s fiscal math is completely on track. There is no proposal to ask RBI to transfer Rs.3.6 or 1 lakh crore, as speculated. Government’s FD [fiscal deficit] in FY 2013-14 was 5.1 per cent. From 2014-15 onwards, Government has succeeded in bringing it down substantially. We will end the FY 2018-19 with FD of 3.3 per cent. The government has actually foregone Rs.70,000 crores of budgeted market borrowing this year.”
Lot of misinformed speculation is going around in media. Government’s fiscal math is completely on track. There is no proposal to ask RBI to transfer 3.6 or 1 lakh crore, as speculated. (continued…).
— Subhash Chandra Garg (@SecretaryDEA) November 9, 2018
Government’s FD in FY 2013-14 was 5.1%. From 2014-15 onwards, Government has succeeded in bringing it down substantially. We will end the FY 2018-19 with FD of 3.3%. Government has actually foregone 70000 crore of budgeted market borrowing this year. ( continued …..)
— Subhash Chandra Garg (@SecretaryDEA) November 9, 2018
Only proposal under discussion is to fix appropriate economic capital framework of RBI.
— Subhash Chandra Garg (@SecretaryDEA) November 9, 2018
Even if we don’t go into the details of the government-RBI spat over the subject, it is true that the fiscal situation is tight. One wonders why. The government earned lakhs of crores when international crude prices were low. Yet, the fiscal deficit has not vanished; it has been targeted at 3.3 per cent this financial year, and even that seems difficult to achieve.
Besides, the government claims that it has carried out two great reforms, demonetization and goods & services tax (GST), which have hugely benefited the economy (One has to be gullible to call these actions as ‘reforms’ but that’s another story). On the second anniversary of the demonetization, Jaitley wrote, “The impact of demonetization has been felt on the collection of personal income tax. Its collections were higher in Financial Year 2018-19 (till 31-10-2018) compared to the previous year by 20.2 per cent. Even in the corporate tax, the collections are 19.5 per cent higher. From two years prior to demonetization, direct tax collections have increased by 6.6 per cent and 9 per cent, respectively. In the next two years, post-demonetization the increase by 14.6 per cent (part of the year before the impact of demonetization in 2016-17) and an increase of 18 per cent in the year 2017-18.”
Higher tax base but tighter fiscal deficit?
He also went on bragging about the increase in the filing of income-tax returns. “In May 2014, when the present Government was elected the total number of the filers of income tax returns was 3.8 crore. In the first four years of this Government, it has increased to 6.86 crores.”
Further, the Finance Minister claimed that the two reforms have curbed cash transactions, increased digital transactions, and formalized the economy. “This has given a buoyancy to the indirect tax growth in the economy. This has benefited both the Centre and the states. Every state, post-GST, is getting a mandatory 14 per cent increase in the taxation each year… In 2014-15, the indirect tax to GDP ratio was 4.4 per cent. Post-GST it has climbed up by at least 1 percentage point to 5.4 per cent.”
If everything is so hunky dory, why is the government finding it hard to meet the fiscal deficit figure? Why does the government want RBI money? Jaitley claims that the “government has used these [augmented] resources for better infrastructure creation, social sector, and rural India.”
Rankings praised only when there is a rise?
According to the latest Human Development Index (HDI) ranking by the United Nations Development Programme India stood at 130 among 189 countries, below Sri Lanka ranked (76) and Maldives (101). The World Bank’s Human Capital Index (HCI) too showed India in an unflattering light, placing it at the 115th position out of 157 countries on such parameters as survivability measured by under-five mortality rate.
Typically, the government rejected the World Bank report, saying that there were “major methodological weaknesses, besides substantial data gaps.” Of course, it didn’t say the same about the Bank’s last two ease-of-doing-business reports which have catapulted India by 57 notches. The World Bank is flawed when its findings don’t suit the government; the World Bank is correct when its report favours the government.
Jaitley keeps telling fairy tales not just on the social sector but also rural India. The government couldn’t spend money and resources to stop crop burning in north India, and yet the Honorable Minister talks about buoyancy in tax collection. Everything he says is contradicted by facts, but then he is an honourable man.
Note:
1. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.
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Mr. Kapoor’s opinion articles are usually informative and a pleasure to read. But this time he fails. He is flailing away in different places, can’t back up the point he wants to make that the economy is not in good shape. His can fault the GOI for oversight in not rising to stopping farm waste but to infer an economy-problem thereby is not being very objective.
Yes. he is an honorable man bcoz he has got hold of BJP. Not sure how and why but he has. I will not be surprised if he raises and BJP projects him as PM for next term.
it is not ache din only AJ din.
Friends, Indians, countrymen, lend me your ears;
I come to bury India, not to praise it.
The evil that men do lives after them;
The good is oft interred with their bones;
So let it be with India. The noble Jaitely
Hath told you India was ambitious:
If it were so, it was a grievous fault,
And grievously hath India answer’d it.
Here, under leave of Brutus and the rest–
For Jaitely & Modi is an honourable man;
So are they all, all honourable men–
Come I to speak in India’s funeral.
He was my friend, faithful and just to me:
But Brutus says he was ambitious;
And Jaitely & Modi is an honourable man.
He hath brought many captives Delhi to London
Whose ransoms did the general coffers fill:
Did this in India seem ambitious?
When that the poor have cried, India hath wept:
Ambition should be made of sterner stuff:
Yet Jaitely & Modi says it was ambitious;
And Jaitely & Modi are an honourable man.
You all did see that on the Lupercal
I thrice presented him a kingly crown,
Which he did thrice refuse: was this ambition?
Yet Jaitely & Modi says India was ambitious;
And, sure, he is an honourable man.
I speak not to disprove what Jaitely & Modi spoke,
But here I am to speak what I do know.
You all did love him once, not without cause:
What cause withholds you then, to mourn for him?
O judgment! thou art fled to brutish beasts,
And men have lost their reason. Bear with me;
My heart is in the coffin there with India,
And I must pause till it come back to me.