ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Misguided Priorities

Union Budget 2018–19

Misguided Priorities

A close examination of the recent trends in government finances suggests that the expenditure pattern of the government does not provide any assurance for the future in terms of building adequate social capital. The regressive nature of taxation policy in recent years along with reduced government spending has put additional burden on out-of-pocket expenditure of individuals.

If the size of government is measured by expressing total government receipts and expenditure as a percentage of gross domestic product (GDP) at market price, we would see that it has been reducing in recent times. Receipts and expenditure together constituted 30% of GDP in 2011–12, and declined to 26% of GDP in 2014–15. It remained nearly at that level, thereafter (Table 1). This is budgeted to go down to 25.8% of GDP in 2018–19. Except in 2014–15, total receipts generally remained higher than total expenditure. According to budget estimates, total receipts as percentage of GDP is expected to be fractionally lower than total expenditure.

In both receipts and expenditure, the revenue component is dominating. Revenue receipts remained at about 8.8% of GDP between 2011–12 and 2014–15, and this marginally rose to 9% in 2017–18. It is expected to go up to 9.2% in 2018–19. This is largely because of the increased collection of tax revenue that went up from 6.9% of GDP in 2015–16 to 7.6% in 2017–18, and is budgeted to go up further to 7.9% in 2018–19.

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