A short in depth mathematical overview of Central government expenditures: Union Budget 2023

Photo from prepp by collegdunia

 A. Introduction: 

The budget is an annual financial statement of the government of India which details the reciepts & expenditures by the government of India in a very detailed manner. The union budget for the financial year 24  was announced on 1 Februrary 2023 with a vision for amritkaal

This year budget was unique for many aspects one among them being that this was the last full time budget of this term of the Narendra Modi government. The second unique issue was of rising the Capital expenditure by a whopping 33%. Usually in the budgets the expenditure part is always dealt with a lot of focus to ensure it as a confidence building measure with the masses at a time.

B. Basic definitions: In economics, there are generally 2 kinds of expenditure, one is revenue expenditure  is the part of the budget which does not  lead to creation of assets in short or long term. It may create assets indirectly but it does not create assets directly. Best examples can be of pensions, salaries to employees, welfare schemes,defence budget etc. 

Though these expenses can create social welfare but they do not create direct capital value in the economy.The other kind is of capital expenditure which should either result in creation of assets or in reduction of liabilities for the government. It has a direct affect on the total fiscal deficit as well. 

C. Prominent verticals analysis: 

Pensions expenditure: Pensions are generally given to the people who have retired from the service. In India, currently the national pension system (NPS) is in force in India. In this section we will talk about the pensions for the central government employees. As per the Budgeted estimates of the FY 24, the  expenditure on pensions is projected to be upto 2,34,359 crore which is a rise by 13% from the last year budgeted estimates which was pegged to be 2,07,132 crore. The rise in the pensions expenditure by the government is due to the fact that the revised estimates of the FY23 defeated the Budgeted estimates by approximately 43,000 crore, hence the rise in the pensions have occured. The number of employees enrolled in the EPFO system will also consider a good chunk of the central government employees who have recently enrolled into the system, hence its a highly plausible that  with increased formalisation of economy, the pension bill of the government will also likely surge. The government of India has to also keep a close button on the expenditure on pensions as it can cause the government of India to reduce its capital, 2 solutions can be of increasing revenue through direct sources & implementing NPS at a breakneck pace. 

PM KISAN Scheme:   The PM Kisan Samman Nidhi which gives farmers Rs. 6000 per year as basic minimum support. Its a central government funded scheme. Its operational in most of the states in India.It became operational from 1 December 2018, under the scheme, e-KYC is compulsory and every farmer has to register himself with it. The PM Kisan Samman Nidhi has been allocated funds worth 60000 crore which is down by 8000 crore from the budgeted estimates of the Fiscal year 2023, the possible reason can be that the Revised estimates of the FY 23 was at exact 60000 crore, which means that upto 10 cr farmers would be  given the benefits of the same.  However, with general elections scheduled for 2024, we may see more states registering more farmers for the PM-Kisan scheme meaning the revised estimates can very well defeat the budgeted estimates for this fiscal year.

Development of North east:  The development of north east is of top priority for the government of India , the 8 states of north-east India(Sikkim,Arunachal Pradesh, Assam, Meghalaya,Mizoram, Manipur,Nagaland, Tripura) which are startegically important for India's national security along with being blessed with a lot of natural resources which can be the engine for India's economic growth in the future. The funds allocated for the development of north east has been approximately about 5900 cr this budget, this is a percentage rise of almost about 110.42% which is probably the highest budget hike probably in the entire budget. The government of India would be seeing to complete important projects like PM-DevINE scheme out of which mostly is for capital expenditure which is almost of  70% of the capital outlay this year,the allocation of tribal sub plan has been enhaced to 1690 cr. However, the entire development of north east should also happen in a holistic manner and it would be good if modern infrastructure like Vande Bharat trains are also provided.Some, routes for Vande Bharat express can be from Dibrugarh-Siliguri, Agartala-Tinsukia to name a few. The infrastructure development in north east will strengthen India's economy as a whole. 

Education: Education is the backbone for the economic development in any country. The education budget of India is pegged to be at 1,12,889 crore which is approximately a percentage rise of 8.257% as compared to the previous year education budget which was about 1,04,278 crore in the FY23. Some important projects enhanced to the education sector this year has been of issues like the promotion of research in India, enhancement of services of national digital library, building of 157 nursing colleges along with the existent medical colleges, along with building of IIT's, IIM's in different cities. Cities where IIT can be started are as follows: Warangal, Davangere, Surathkal, Kozhikode, Coimbatore,Kangra, Udhampur,Darjeeling,Shillong, Lucknow, Pune, Vishakapatnam, Imphal to name a few. Similarly IIM's can be started in: Mysore, Trivandrum, Darjeeling, Agartala, Jaipur,Karimnagar,  Nagpur,Shimla, Mehsana, Barmer,Anantnag. The IMU's can also be started in multiple cities along the coast line where the Indian coast guard has been  posted so that a proper integration between maritime security & development of blue economy takes place, some of the places can be: Vizag, Paradwip, Howrah,Shillong,Thottukudi, Vizhingam, Jamnagar, Mumbai, Karwar. Some other important schemes can be launched is of a shikshak samman nidhi to remove the underpayment of the teachers.

Transport: The transport-logistics sector has been the most  critical sector for the Indian economy from the past few years, with many big ticket projects coming up recently like the Samruddhi Mahamarg, Delhi-Mumbai expressway to name a few. The transport sector has seen its budgeted expenditure rise by a whopping 46.94% to the present figure of 5 lakh 17 thousand crore which is almost 4.5 times the budget allocated to the home ministry.Though this expenditure can be considered as a capital expenditure but its an expenditure which will bring a lot of qualitative change in the lives of people in India, majority of whom travel using roadways.

Conclusion: 

The blog focused only on a few specifics because these are the issues which form the basics of the economic developmement in a sustainable manner. 

Reciept status of Government of India: An in depth analysis of Union budget

Source: geeks for geeks, these are the 7 basic objectives of government budget in India 

A. Revenue Reciepts: 

These are the income of the government where its asset-liability status wont be changed. Major is tax & non tax. 

    Revised estimates is only analysed in this article as it gives a proper estimate of the difference between what is said in the budget to the real part,it also shows a lot about funds utilisation. Revenue reciepts through taxes contribute to almost 58% of India's revenue sources. 

A1: Tax Revenue: Revenue gained  through taxes namely: GST, Customs, Corporate, Income Tax,excise to name a few. This component of the budget is expected to rise from from 2086662 CR(BE of 2022-23) to upto 2330631 Cr(BE of 2023-24), inspite of rationalisation of IT Slabs the Budget estimate is expected to rise due to the rise of taxes on multiple goods like customs hike on rubber by 15% which was announced this year. 

There are 2 kinds of tax: Direct & Indirect to simplify it for the readers. One of the reason behind this rise in the tax revenue can be attributed to the PAN card as the digital identifiers, which will compound a rise in the GST rates. In percentage wise,  this is a rise in 20.4%  of the tax revenue component of the government. The GST collections would hit new records with the budget announcements this year. Another probable logic can be because of rationalisation of tax system along with measures like Vivaad se Vishwaas scheme inital success this component of the government budget is projected to rise. Major changes is that the customs on items will be reduced from 21% to 13%. Customs on lithium ion batteries(solar cells manufacturing) & associated components have more or less remained the same this seems in line with the development in geopolitical context where India was able to acquire one lithium mine in the country of Argentina a few weeks ago, customs on parts of open TV Cells have been reduced by 2.5%, customs on chimneys heat oil(component in exhaust devices), customs on agriculture has been unchanged primarily to protect the agriculture sector in India which also proves mercantilism is still alive in some form or other.

              Sub section wise analysis:

1.   Under the same, the Income Tax reciepts is expected to rise by 28% if we see it from the lens of budgeted estimates of 2022-23, in the sub sections, the same ratios have been taken into consideration as the data of revised estimates for FY 24 is not published so far. This rise is optimistic because of the difference between RE-BE of FY 24& FY 23 was almost of 11 lakh cr.
2. The corporation tax reciepts to rise from 7,20,000 cr(BE 2022-23) to 922675 cr(BE 2023-24) which is a huge rise of almost by 28.149% which is almost similar with that of the income tax collections, the optimism is due to the revised estimates of FY 23 defeating the BE of 23 by almost 10 lakh crore.
3. The fact that there is not a lot of difference between the budgeted estimates of corporate tax & income tax raises a lot of eyebrows among the practioners of public finance in general as the number of persons giving Income Tax has not increased in the country in the past many years, however the number shows that we may be seeing a future where the role of corporate tax & income tax sees more or less equal amount of growth in the future. This can be collaborated by the fact that both the corporate tax & income tax had contributed 15% each in the overall reciepts of India in the FY 2023. 
4. This also means that the role of GST in India is going to increase significantly, as of FY 2023 the GST contribution to the reciepts of the government was 17%, there is a rise in the budgeted estimates of the FY23 & FY 24 by upto 24%, this optimism is also due to the reason that the GST collections in FY 23 defeated the BE by a huge number of almost 7 lakh crore. 
5. As students of economics, we must note that the, figures of GST & Corporate tax is an indicator of corporate health & a parameter of success of ease of doing business, because ease of doing business & profits can only be risen when there is an environment conducive for the same. 
6. The next component of direct taxation is that of the custom duties, this is one sector of the direct/indirect taxation where the government seems to either underestimate its performance or be pessimistic about it underperforming with respect to the other sources of taxation. The reason behind this being that the percentage difference between the budgeted estimates of FY 23 & FY 24 is very meagre rise of only about 9%, the reason behind this pessimism related to customs can be due to fact of Revised estimates of 2022-23 was under the Budgeted estimates by almost about 3000 cr while other direct taxes revised estimates outperformed their budgeted estimates by huge margins. The contribution of customs to the revenue reciepts stands at 4%. 

A2.Non-Tax Revenue: Revenue gained through taxes namely as Escheat(land left behind without an inheritor) along with multiple forms like bonds, donations, fines, e-challans etc. these are taxes which can be bypassed by the people and is not compulsory, these taxes does not add any value to the product manufacturing sector. Ideally an economy should reduce revenues from the non tax areas as they are volatile & many a times uncertain for the central government,this is projected to rise from BE 269651 cr to almost upto 301650 cr BE  this year. In percentage wise, this is a rise of almost 11.88%.

 Its expected that the interest payments would be returned this year by many borrowers of the state governments in India which is the logic behind the projected rise of the non tax revenue.

                               Sub category wise analysis:

1. Reciepts of union territories: The government has significantly reduced its outlook towards the reciepts of union territories in this year budget, it has been a fall of about 494 crore rupees from the  difference of BE 23 & BE 24. This component is for those Union territories who do not havea legislature like: Andaman & Nicobar Islands, Lakshwadeep Islands, Dadra Nagar Haveli, Daman-Diu, Ladakh. However with the infinite development potential available in these states its highly  possible that the Revised estimates of 2024 will defeat the budgeted estimates of 2024.
2. External grants: Grants are basically the help provided by the  foreign governments/multilateral institutions for the development of India. The external grants have been projected to rise from BE 2022 which was about 620 crore to about BE 2023 which is about 2135 crore , this rise in terms of percentage is of about 70.69%, the reason behind this rise is hidden in data of RE of fy 23 which outperformed its BE by about 2000 crore. The reasons being the borrowings of multiple governments to fulfill the Sustainable developmental goals.

B. Capital Reciepts:

Capital Reciepts are those income sources which mainly create liabilities or reduce assets. Capital reciepts include: loans taken by public government, borrowing from foreign countries,borrowings from RBI. 

• Loan Recovery:  Recovery of loans have BE 2022-23 14291 cr will fall to BE 2023-24 to 23,000 cr, implying that the loan recovery process will be slow. However it also implies that liability creation by the government will be less this year. 

1. This fall between the BE of 2022-23 & BE of 2023-24 in aspect also shows that there is a requirement for the ministries to ensure that the interests recovery take place properly.This is a rise by almost 60%,however, point to be noted that the revised estimates of 2022-23 defeated the budgeted estimates by almost 9 lakh cr which indicates that the government recovery methods were on the right path, hence financial analysts, believe that the government can trump its BE this year with the same intensity. 

• Borrowings & Other liabilities: Borrowings is the part of capital reciept which is of the utmost interest for the economists. Borrowings show the resilience as well as the strength of the public tax  collection methods as well as the success of implementation of big cash projects, for the reason, usually borrowings are done to help the government complete its projects, borrowings is also done to ensure that the pace of infrastructure growth does not get hampered, it is used to fund budget deficit(when budget expenditures exceeds the budgeted reciepts). 

1. The BE of 2022-23 was pegged at 1661196 cr whereas this year BE of 2023-24 is pegged at 1786816 cr. This rise between the BE is almost of  7.6% which shows that the government of India is interested in completed its big ticket projects through the ways of borrowings. There is less chance of revised estimates crossing the Budgeted estimates of FY24 since, the revised estimates of FY 23 crossed the budgeted part only by 2.3%, which shows that the government of India is heavily focusing on maintaing the fiscal discipline in the economy.

Conclusion & Key observations: 

The key observations only from the reciepts of the central government throws some interesting & out of the box conclusions for many of the observers of economics of the world. The first observation being that of the equal contribution of corporation tax(which is levied only if profits is earned) & IT in the revenue reciepts of India, the second conclusion can be that the government is looking & acting to seriously reduce the amount of contribution of the capital reciepts-non tax revenue reciepts which will enforce financial discipline in the future. The fourth conclusion can be we can be seeing a situation where the entire revenue system is partly dependent on the Goods & Services Tax regime, which will help India realise the goal of developing a parallel economy quickly & in the most efficient manner. 

From a strictly reciept point of view of the government, it seems that 2023 Budget has been the first step for Amritkaal revenue reciepts.

Sources: 

ALL Sources are attached in the hyperlinks & the main source used is Budget in a Glance 2023.