Budget 2017-18

India’s Model of Government-Financed Skill Development Is Ineffective

No country that runs a government-driven system for technical and vocational education and training has been successful in doing so.

Construction workers are silhouetted as they work at a high rise building in Kolkata January 25, 2008. gathered in the... REUTERS/Parth Sanyal/Files

Construction workers are silhouetted as they work at a high rise building in Kolkata January 25, 2008. Credit: Reuters/Parth Sanyal/Files

The 2017 Budget reinforced the idea that the government seems to believe that India’s skill development challenge can essentially be met by government efforts. Less than 5% of India’s workforce of 500 million has received any form of formal vocational training. Moreover, half of our workforce in 2010 was either illiterate or had primary/less than primary education. Hence, apart from education for all, skill development has also become a huge challenge.

Given these twin challenges, and given that we are now adding some five to seven million youth to the labour force annually – not 12 million as is commonly believed – who have higher levels of education than those currently in the labour force, it is critical that government’s own education efforts must ensure that all children are completing eight years of schooling and that actual learning in school is more. In addition, given that the governments – Union and state – have limited financial resources, the government should not be increasing financial allocation to education and skill development simultaneously. In fact, the Union Budget of 2017-18 is characterised by almost no efforts to increase allocation to education, which is deeply unfortunate.

However, the government has sharply increased allocation to skill development efforts. The Ministry of Skill Development and Entrepreneurship’s actual expenditure in 2016-17 stood at Rs 2,173 crore (revised estimates). This amount was increased in the 2017-18 Budget to Rs 3,016 crore.

The skill development programmes of other union ministries have also benefitted. The Budget proposed to increase the allocations for Deendayal Antyodaya Yojana-National Rural Livelihood Mission for the promotion of skill development and livelihood opportunities for people in rural areas to Rs 4,500 crore in 2017-18. Besides imparting new skills to the people in the rural areas, mason training will be provided to five lakh people by 2022, with an immediate target of training at least 20,000 people by the end of FY 2017-18.

Pradhan Mantri Kaushal Kendras have already been promoted in over 60 districts, the Budget now proposes to extend these kendras to more than 600 districts across the country. The government also aims to establish a 100 India International Skills Centres across the country. These Centres would offer advanced training and courses in foreign languages, which are supposed to “help those of our youth who seek job opportunities outside the country”.

In 2017-18, the Budget also proposes to launch the Skill Acquisition and Knowledge Awareness for Livelihood Promotion programme (SANKALP) at a cost of Rs 4,000 crores, which aims to provide market relevant training to 3.5 crore youth.

The next phase of ‘skill strengthening for industrial value enhancement’ will also be launched in 2017-18 at a cost of Rs 2,200 crores, a programme that will focus on improving the quality and market relevance of vocational training provided in the Industrial Training Institutes and strengthen the apprenticeship programmes through an industry cluster approach.

Clearly, the government’s own skills programmes will grow as a result. However, this ignores the overwhelming evidence from around the world that no country that runs a government-driven system for technical and vocational education and training (TVET) has been successful in doing so. Government-driven systems are supply-driven, without regard to skill demand. Government-driven systems also tend to be financed by governments, rather than those who will benefit most from the skill development – the employers and trainees. A recent World Bank study of the employment status of five government financed programmes states that only 27% of those who were a part of it received employment.

If TVET systems are employer-driven, they will be very responsive to demand and the changing needs of industry. However, the catch is that in order to be successful, employer-driven systems must also be employer-financed. As many as 63 countries of the world including those in Asia, Latin America, Europe and Africa have employer-financed and industry-driven systems.

But government-driven systems are rarely able to respond to the fast-changing technologies commensurate with market demand. This is not to say that government financing is not needed. It is needed so that the needs of the unorganised sector for skill development are met, as are the needs of the less privileged sections of youth. For the unorganised sectors, its role should be to ensure recognition of prior learning for those in the workforce, who over the years have acquired vocational skills on the job, but have no certificate to prove it.

The government’s financing role and regulatory role should be limited to these tasks. If the government focuses on financing and providing skills to both the organised as well as the unorganised sectors along with performing a regulatory function, there will likely be a lack of efficiency, effectiveness and quality of training. However, the Union Budget is still reflective of a half-century old philosophy of manpower planning – and financing such planning – with little regard to whether any of these trained youth get employment.

Santosh Mehrotra is a professor of economics at Jawaharlal Nehru University and the editor of India’s Skills Challenge: Reforming Vocational Education and Training to Harness the Demographic Dividend, Oxford University Press, 2014.

Reducing Budgetary Allocations For Priority Sectors Is Harmful and Undemocratic

The Budget is passed by parliament on the basis of certain allocations for critical areas. How, then, can these allocations be drastically changed without parliamentary approval?

A view of the parliament building in New Delhi. Credit: williewonker/Flickr CC BY-SA 2.0

This is the second article in a two-part series. Read the first part here.

Any analysis of recent Budgets in terms of comparing Budget estimates and revised estimates will reveal that often reductions are made even in priority schemes in an arbitrary manner. At the time when these cuts are made, no consultation is held with affected groups (or their representatives, like organisations of workers, farmers or women). There is no public announcement. Reliable information becomes available to people only much later, when the financial year is almost over and efforts to stop these cuts are meaningless.

This is a serious question not just of transparency but of democracy as well, since the Budget is passed by the parliament on the basis of certain allocations for critical areas. How, then, can these allocations, particularly for vulnerable people and critical sectors, be changed without parliamentary approval?

Of course we are not talking here of relatively small cuts of 5% or so, which could be based on various practical considerations. But when cuts between 25-100% are made in a cavalier manner, as is evident from data on the previous year’s Budget, then questions need to be raised.

After all, people have a right to know what happened in the relatively short period between the presentation of the Budget and the preparation of the revised estimates which made it necessary to curtail allocations for priority sectors and schemes, with which the welfare of millions of people is closely associated. Unfortunately, however, such reasons are seldom given, a reasoned debate seldom takes place; instead reductions are made arbitrarily, silently and secretly.

The nearest one came to an informed debate on this issue was in the year 2014-15, the first year of the present NDA government. An interim Budget had been presented by the previous Congress-led government that year, but the final Budget was presented very late by the NDA government. In this Budget, many allocations for the social sector were retained at the same level as the interim Budget.

However, within a few weeks of the new government settling in, disquieting news started appearing that big reductions were being planned in the revised estimates for several welfare-oriented schemes. Some social activists and voluntary organisations decided to take this issue further, but these efforts could only go so far in the absence of more definitive information.

Several weeks later, with the financial year about to end, official data on revised estimates was finally released, which made it clear that there had been big cuts in several important schemes in the last few months of the financial year. As that year the Budget presentation had been much later, decisions relating to these big cuts taken within a few weeks of budget presentation appeared more arbitrary, sudden and difficult to understand.

The official data for 2014-15 revealed that the budget for Beti Bachao Beti Padhao had been reduced from Rs 90 crore to Rs 45 crore, while the budget for restorative justice to rape victims had been reduced from Rs 20 crore to zero. Similarly, the budget for Rashtriya Mahila Kosh, one-stop crisis centres and assistance to states for the implementation of the Domestic Violence Act had also been reduced to zero in the revised estimates. The budget of the most important scheme for adolescent girls called SABLA had been reduced from Rs 700 crore to Rs 630 crore, while that for reform homes was reduced even more drastically.

The budget of the Department of Disability Affairs was reduced from Rs 632 crore to Rs 441 crore, with some schemes facing drastic cuts. The budget for the Department of Health and Family Welfare was reduced from a Budget estimate of Rs 35,163 crore to a revised estimate of Rs 29,042 crore.

Allocation for the Ministry of Housing and Urban Poverty Alleviation was reduced from a Budget estimate of Rs 6,008 crore to a revised estimate of Rs 3,413 crore. The allocation of the Ministry of Urban Development was reduced from a Budget estimate of Rs 17,628 crore to a revised estimate of Rs 11,013 crore. The revised estimate for the National Livelihood Mission was found to be only Rs 733 crore compared to Budget estimate of Rs 1,003 crore.

These arbitrary Budget reductions can be very harmful for vulnerable groups. Yet, governments continue to carry them out in an unaccountable, secretive manner.

Bharat Dogra is a freelance journalist who has been involved with several social movements and initiatives.

The Government Isn’t Spending Its Budgeted Allocations on Priority Schemes

While media focus continues to be on low allocations, what slips past unnoticed is that even those amounts aren’t lived up to.

Finance minister Arun Jaitley arrives at the parliament to present the budget for the 2016/17 fiscal year, in New Delhi, India, February 29, 2016. Credit: Reuters/Adnan Abidi

This is the first article in a two-part series.

At the time of presentation of the annual Union Budget, most attention is on comparing new expenditure allocations with the previous year’s allocations. However, there is certainly a need to look at another important but relatively neglected aspect – the extent to which the previous year’s allocations were cut after the Budget presentation in a big way, arbitrarily and quietly.

If we see this data for the previous financial year, it is clear that allocations for several priority schemes important for poor and vulnerable groups as well as for other important objectives like improving education and protecting the environment were later reduced by significant amounts. Curiously, this even includes schemes which the government has been publicising as its priorities.

Let’s first look at some agricultural schemes, as it was widely publicised that last year’s Budget had prioritised agriculture. One frequently talked about scheme is the Paramparagat Krishi Vikas Yojana (traditional agriculture development scheme). If properly implemented, this has rich potential for important objectives like saving traditional seeds and protecting on-farm biodiversity. Unfortunately, while last year the Budget estimate or original allocation for this was Rs 297 crore, the revised estimate was reduced to just Rs 120 crore, which is less than half of the original allocation. Similarly, the Budget estimate of Rs 1,700 crore for the food security mission for the last financial year was later cut to a revised Budget of Rs 1,280 crore, a substantial reduction. In the case of another priority agricultural scheme, the Rashtriya Krishi Vikas Yojana, the original Budget estimate of Rs 5,400 crore was reduced significantly to a revised estimate of only Rs 3,550 crore.

At a time when there is a pressing need to reduce edible oil imports, the importance of the National Mission on Oilseed and Oil Palm has increased further. It is disturbing to know, then, that the original allocation for this mission of Rs 500 crore was later revised to a much lower Rs 376 crore. In fact, even the overall allocation for the high priority Pradhan Mantri Krishi Sinchai Yojana was reduced from Rs 5,767 crore to Rs 5,182 crore.

Coming to women and child welfare, the ‘Beti Bachao Beti Padhao’ campaign for girl children is clearly a high priority and highly publicised scheme. Yet, the original Budget estimate for the previous financial year of Rs 100 crore was later reduced to a revised Budget of just Rs 43 crore, less than half of the original allocation.

In the Union Budget for the year 2016-17, an allocation of Rs 144 crore had been made for the creation of a national platform of unorganised workers and the allotment of Aadhaar-seeded identification numbers. But this did not take off, and the revised estimate for it was just 0.5 crore.

The original allocation of Rs 1,500 crore for the Rashtriya Swasthya Bima Yojana was later reduced to a revised estimate of Rs 724 crore.

In the Department of Financial Services of the finance ministry, the original allocation of Rs 209 crore for the Svavalamban scheme (meaning self-reliance) was removed altogether in the revised estimates. The original allocation for government contribution to the Aam Aadmi Bima Yojana was Rs 450 crore, which was later cut to just Rs 100 crore. Similarly, the association of the name of the tallest leader of the ruling party with the Atal Pension Yojana could not save it from the reduction of its Budget in the previous year from Rs 200 crore (Budget estimate) to Rs 40 crore (revised estimate). The interest subsidy to the LIC for its pension plan for senior citizens was also reduced from Rs 172 crore to Rs 137 crore.

In the context of environmental protection – more specifically climate change mitigation – the promotion of renewable energy is becoming more and more important. Despite this, however, Budget estimates for various heads of renewable energy were later reduced significantly. For grid-interactive renewable power, the Budget estimate was cut in the previous financial year from Rs 3,519 crore to Rs 3,091 crore. In the case of off-grid/distributed and decentralised renewable power, the cut was from Rs 983 crore to Rs 808 crore. In the case of research, development and international cooperation in the sector of renewable energy, the Budget allocations went from Rs 445 crore to Rs 273 crore.

Bharat Dogra is a freelance journalist who has been involved with several social movements and initiatives.

RBI’s New Monetary Policy Statement Is Surprising – In a Good Way

The RBI’s statement, the first after the Budget, carries forward the Budget’s message of fiscal discipline and consolidation.

Office of the Reserve Bank of India. Credit: PTI

The Monetary Policy Committee in its statement of February 8 sprang two surprises. The relatively minor one was to hold policy rates. The policy repo rate remains unchanged at 6.25%. Consequently, the reverse repo rate remains unchanged at 5.75% and the marginal standing facility rate and the bank rate both at 6.75%.

This is the second time in a row that the RBI has held rates. There were optimists who expected a rate cut but as was the case before, at least among close market watchers, the policy-eve expectation of a rate cut was tempered by the realisation that the RBI might have touched the bottom of its interest rate cycle. According to this view, further cuts are not on the cards at least till the end of this year.

It is for these reasons that the maintenance of a status quo in the rates ought be considered only as a minor surprise. By far a bigger surprise has been the shifting of the monetary policy stance from ‘accommodative’ to ‘neutral’.

Behind this changed stance are at least three important reasons: the view that growth will rebound during the second half of the year, the RBI’s desire to focus on inflation and move decisively to the 4% target (headline CPI) and there are concerns that inflation will rise beyond the 4% target in the medium term and very likely be in the range of 4.5-5%.

The further argument is that if the central bank found it difficult to cut rates when its stance was accommodative (as was the case till recently), it will be far more difficult to do so when it had tightened its stance.

A change might happen only if inflation and growth overshoot their targets. The point has been made that even a neutral stance admits of flexibility. The RBI will intervene if circumstances so warrant.

The threat to upside risks on inflation materialising are real. At least three factors matter here: the hardening of global fuel prices which analysts do not expect to soften, volatile exchange rate movements partly caused by an unpredictable Donald Trump administration and delayed implementation of the Seventh Pay Commission.

Core inflation excluding food and fuel has been sticky at 4.9% since September.

Demonetisation and monetary policy

In December, there was an overhang of liquidity consequent upon demonetisation. But according to the policy statement from mid-January, some rebalancing has been under way with expansion of currency in circulation. Demonetisation has caused a flood of deposits with banks. This will bring down the commercial lending rates. This is not an unalloyed blessing however, as on the deposits side banks have to bear an as yet indeterminate cost in booking the deposits. Second, a surfeit of funds will not by itself contribute to a healthy lending portfolio. The point has been made several times before that credit availability is not the same as credit delivery.

There is no doubt that some banks eager to lend might end up with non-performing assets. After all, banks are judged by profitability parameters. Idle cash balance does not contribute to healthy balance sheets.

Households have no cause to cheer. In yet another glaring omission, the monetary policy has failed to highlight the travails of households in the face of rapidly falling bank deposit rates. Needless to add, bank deposits are the only safe investment option to households, especially for the vulnerable sections such as pensioners.

Far from paying even lip service to their cause, the policy statement hints at the need for adjusting small savings interest rates to changes in the yields on government securities. This, it says, is to enable better transmission of policy rates to the economy.

The policy statement plays safe with its expectations of growth. GVA growth for 2016-17 is projected at 6.9% with risks “evenly balanced”.

For 2017-18, the RBI is much more optimistic. Economic growth is expected to revive sharply. Among the factors it is banking on, the discretionary consumer demand held back by demonetisation is expected to bounce back during the last quarter of the current year.

A verdict on the sixth bi-monthly statement should reckon with macroeconomic management in its entirety. The Budget, whatever be its shortcoming, emphasised fiscal discipline. The RBI statement, the first after the Budget, carries forward the message of consolidation. The absence of a rate cut along with the changed policy emphasis are very relevant pointers.

Can Budgeted Infrastructure Investment Drive Growth and Job Creation?

Spending on Housing for All, road construction and other infrastructure projects is likely to create jobs, but it remains to be seen whether this alone will be enough.

Representative image. Credit: Reuters/Rupak De Chowdhuri

India was the fastest growing large economy of the world with its 7.6% GDP growth rate in 2015-16. This is the fastest the Indian economy grew in the five years since 2011-12. Growth may lower by at least 0.5% and perhaps by one percentage point in 2016-17, the Ministry of Finance’s Economic Survey admits. But will it continue to grow at this pace in 2017-18? What can we say on the basis of the Budget for 2017-18?

Equally importantly, economic growth is meaningful not for its own sake, but mainly because it creates the possibility of new non-agricultural jobs. Job growth leads to an increase in consumer demand, which has the effect of sustaining GDP growth and in turn encouraging greater private investment and reducing growth volatility.

More people, less jobs

New non-agricultural jobs created between 1999-2000 and 2004-5 were 7.5 million per annum (but then the increase in entrants to the labour force was 12 million per annum). However, between 2004-5 and 2011-12, the additions to the labour force were only 2 million per annum. Meanwhile, due to sustained private investment, GDP growth was 8.4% per annum between 2004-5 and 2011-2. An additional 7.5 million new industrial and service sector jobs were created between 2004-5 and 2011-12. In other words, if the economy continues to grow rapidly India has already demonstrated an ability to generate at least 7.5 million new jobs annually over a 12 year period from 1999-2000 and 2011-12.

The new entrants to the labour force is not 12 million per annum, unlike what most people believe. The additions to the labour force had fallen sharply after 2004-5 because a growing number of children (6-14 year olds) were in school and higher numbers of 15-16 year olds were remaining in school. Secondary enrolment (classes 9-10) rose from 62% in 2010 to 79% in 2015. Since 2011-12, India is probably adding only 5-7 million better educated youth to the labour force per annum. In addition, since 2004-5, some five million are leaving agriculture, looking for non-agricultural work. Creating two different types of jobs for these two groups is the challenge facing the government. These two groups have rather different aspirations: the latter, with limited or no education or skills, are best absorbed in infrastructure-driven construction. The former, on the other hand, are better educated and may have some formally acquired skills, albeit limited. They will only look for modern services or manufacturing-related jobs. Has the Budget done anything to create jobs for these two groups?

The role of infrastructure investment

One of the most important sources of increased consumer demand since the turn of the century was the increase in infrastructure investment. Starting with the Golden Quadrilateral Highway network, which began construction in 2001, infrastructure investment picked up. As a result the number of workers in construction rose from 17 million in 1999-2000 to 26 million in 2004-05. Investment in infrastructure rose strongly thereafter and during the 11th five-year plan (2007-12), infrastructure investment in the public and private sector together grew by $475 billion or nearly $100 billion per annum. The result was that employment in construction jumped from 26 to 51 million, tripling compared to the turn of the century.

That is why the Rs 396 lakh (Rs 3.96 lakh crore or about $ 57 billion, up from Rs 3.48 lakh crore the previous year) investment in infrastructure in various sectors announced by finance minister Arun Jaitley announced on February 1, 2017 is welcome. However, that is nowhere close to the nearly $100 billion worth of infrastructure investment that was taking place during the 11th five-year plan period, which drove construction job growth at a historically unprecedented rate.

Job growth has been much slower since 2012. The labour bureau of the Ministry of Labour compiles statistics for job creation in eight major labour-intensive, non-agricultural sectors each quarter since the 2008 global financial crisis. In these eight sectors, the latest figures show that 1.35 lakh jobs were created in 2015, the lowest figure since 2008, lower than the 4.9 lakh new jobs in 2014 and 12.5 lakh in 2009.

The good news is that infrastructure public investment had picked up in 2015. The government acted to clear 42 stalled projects worth Rs 1.15 lakh crore since February 2015, which activated the idle investments locked in the projects. This began yielding results in 2016-17. Further unlocking of stalled projects will accentuate the GDP and construction job growth.

This is good news for the five million per annum who leave agriculture to look for work in construction. It is also good news for the underemployed persons aged 15 years and above who were available for work for all the 12 months of the year, but only 60% of them found work for more than six months (as the fourth annual survey of employment in 2013-14 noted).

What’s next

The railway infrastructure investments announced by the Budget 2017-18 include: 3,500km of railway lines to be commissioned in 2017-18 (as against the 2,800 km in 2016-17), 25 stations to be redeveloped and solar power for 2,000 stations. Roads will see an increase in allocation from Rs 52,447 crore (revised estimates) in 2016-17 to Rs 64,900 crore n 2017-18. In particular, 2,000 km of coastal connectivity roads will be constructed. The Optical Fibre Network (under BharatNet) has been laid in 1,55,000 km; from nothing the allocation for BharatNet is Rs 10,000 crore in 2017-18, with the objective of ensuring high-speed broadband connectivity on optical fibre in more than 1,50,000 gram panchayats.

Especially important for jobs in rural areas is the budgetary increase in investment in the Pradhan Mantri Grameen Sarak Yojana (PMGSY). Compared to the Rs 7,000-8,000 crore allocation to PMGSY in 2012-13 and Rs 9,000 crore in 2013-14, the allocation increased to Rs 19,000 crore in 2015-16 from the Union government. However, equally importantly, this is only 60%, since the remaining 40% is to come from the state governments; as a result the annual allocations will be Rs 27,000 crore total, taking into account both central and state expenditures. This same sum will be available for each of the next three years, until 2018-19; this has been assured to the Ministry of Rural Development by the finance ministry.

Such an increase in allocations automatically means rural roads will be constructed much faster than they were being done over 2011-14, the last three years of the UPA regime. The average construction of rural roads under PMGSY was 73 km per day over 2011-14; over 2014-16 that number had already gone up to about 100 km a day. With the increased allocation in the current financial year, it is expected to rise to 130 km a day, according to reliable senior sources in the Ministry of Rural Development. In 2017-18 and 2018-19 it is targeted to touch even higher. This is not unthinkable, as in earlier years, at its peak in 2009-10, construction of rural roads under PMGSY had reached 145 km a day.

Equally important is the focus on ‘Housing for All’, especially on low-income housing. In 2015-16 a total of 18.27 lakh houses were constructed under the rural housing scheme, the Pradhan Mantri Awaas Yojana (the erstwhile Indira Awaas Yojana). The government will have to construct around 35 lakh houses a year to meet its 2019 target. The Socio-Economic and Caste Census has been used toidentify close to three crore beneficiaries under the scheme.

In this context, the increase in allocation per house from the erstwhile Rs 35,000 per house for BPL families to Rs 1 lakh, should speed up the building of houses in rural areas by BPL households. However, for the Awas Yojana the challenge will to go beyond financial resources to limited labour and material availability. To double the pace of construction of houses, the Union government is recommending to states to use local material and technology to meet any shortage. The Budget announced a rural mason training programme to supply the workforce to expand these construction activities.

Similarly, the significant ramp up in spending on sanitation through the Swacch Bharat Abhiyan is also going to cause much more work creation in rural areas, in the building of toilets. Thus, expenditure on the Nirmal Bharat Abhyaan was Rs 2,250 crore in 2013-14. It had increased to Rs 2850 crore in the first year of the Swacch Bharat Abhiyan; but it jumped to Rs 6,524 cr in 2015-16. The allocation for 2016-17 is Rs 12,800 crore (RE) and last week’s Budget has increased it to Rs 16,248 crore in 2017-18.

Construction employment is, however, of limited important value for the 5-7 million young school-leavers who are joining the labour force, for whom the open unemployment rate is ten times higher than that of those 30 years and above. The unemployment rate for 15 to 17 year olds is 10.2% and for 18 to 29year olds is 9.4% in 2013, but 0.8% for over 30 year olds.

Private investment was down in the first half of 2016-17, 27% of GDP compared to 31% the previous year. Demonetisation has clearly reduced economic activity sharply since then and capacity utilisation is running at 70% in industry currently. With the ‘twin-balance sheet problem’ of over-leveraged companies and non-performing assets in banks, there is no possibility of an increase in private investment for the next three-four quarters. Given this situation, will public investment in infrastructure alone be able to carry the burden of sustaining GDP and job growth in the economy?

Santosh Mehrotra is professor of of economics at Jawaharlal Nehru University and ex-director general of the National Institute of Labour Economics Research (of the NITI Aayog).

An Inadequate and Misdirected Health Budget

The Budget allocation for the health sector is not even one-third of the target laid out in the draft National Health Policy.

Pharmacists dispense free medication, provided by the government, to patients at Rajiv Gandhi Government General Hospital in Chennai July 12, 2012. Credit: Reuters/Babu/Files

The draft National Health Policy (NHP) 2015, based on the core principles of equity, universality and affordability, had set three major objectives for the public health sector: expanding preventive, promotive, curative, palliative and rehabilitative services to improve population health status; assuring universal availability of free, comprehensive primary healthcare services; and significantly reducing out-of-pocket expenditure by ensuring affordable secondary and tertiary care services. These booming ambitions, though, were promptly toned down, “taking into account the financial capacity of the country” as it set minimalist fiscal targets for itself: public health expenditure of 2.5% of GDP, 40% of which – i.e. 1% of GDP – would come from the central expenditures.

Inadequate allocations

This year’s central health Budget at 0.29% of GDP – which is marginally better than previous years’ level of 0.26% – is not even one-third of that target. At constant prices, adjusting for inflation (using GDP deflators), this year’s total allocations have increased by 18% over previous years’ expenditures. This appears to be noticeable only because growth of public expenditure on health in the past few years has been marginal. Compared to an expenditure of Rs 26,567 crore in 2013-14 – a year preceding the election of the current government – an allocation of Rs 37,471 crore for 2017-18 (both years’ values at 2011-12 constant prices) represents an annual increase by only 9% (compound annual growth rate or CAGR). Growth of per-capita expenditures for the same period is 7.7% (calculation using UN Population Division estimates).

Source: Union Budget documents

Misplaced priorities

The modest increase by 18% (at constant prices) in total allocation is largely concentrated in tertiary and secondary care sectors. More than one-fourth of this increase (at constant prices) is allocated to upgrade district hospitals into new medical colleges under National Health Mission. Another 26% of the increase in total allocation is on the Pradhan Mantri Swasthya Suraksha Yojana, which is for setting up new AIIMS and upgrading medical colleges.

On the other hand, this Budget completely marginalises primary care and public health. Over the past years, the National Rural Health Mission (NRHM) has been badly neglected, with its share in this year’s central health Budget coming down to 43% (Budget estimates) from 53% (actual) in 2015-16. Within the NRHM, there is an increase of allocation by Rs 2,000 crore (constant 2011-12 prices) under ‘health system strengthening’, which largely will go into transforming 1.5 lakh health sub-centres into ‘health and wellness centres’.

This modest increase in health system strengthening is almost matched by a reduced allocation in reproductive and child health (including immunisation), communicable diseases and maintenance of existing infrastructure. This means that existing public health and primary care facilities, particularly the primary health centres (PHCs) and community health centres (CHCs), will further underperform and lag behind the rural population’s health needs due to a shortage of funds. These rearrangements of sub-heads without any overhaul of allocations to build new infrastructure means the shortfall of 33,000 health sub-centres, along with 22% and 32% shortage of PHCs and CHCs, will still persist. On the whole, a marginal increase in this year’s Budget allocation for NRHM by 4.4% (2011-12 constant prices) over last year’s expenditures (revised estimates) is a death knell for the dying rural public healthcare sector.

The NRHM’s urban counterpart, the National Urban Health Mission (NUHM), is yet to start properly. For the period 2012-13 to 2016-17, its average yearly budgetary requirement was estimated to be Rs 3,391 crore per year from central funds; this year’s allocation is only Rs 752 crore.

The insurance conundrum

Strengthening and deepening a subsidised public healthcare system is a much cheaper option to ensure universal access to healthcare, rather than subsidising private providers via insurances. Yet, the poor perhaps had hoped for a modest health protection following last year’s Independence Day promise by the prime minister about Rs 1 lakh insurance coverage for every BPL family under a redesigned RSBY – now the National Health Protection Scheme (NHPS). The finance minister’s Budget speech, though made no mention of this.

This year’s allocation to RSBY/NHPS, though increasing marginally from last year’s expenditures (revised estimates), has declined compared to last year’s budgeted amount by Rs 500 crore (nominal terms). Upscaling the RSBY to NHPS in the proposed manner was estimated to cost Rs 24,000 crore for five years or on average of Rs 4,800 per year. Allocating Rs 4,800 for NHPS alone would have required more than a 12% increase (in nominal terms) in allocation from last year’s expenditures. With an obvious resource crunch (along with reducing fiscal deficit by 0.3% of GDP), like the implementation of NRHM, implementation of NHPS in the proposed form would have meant even lesser allocation in other sub-sectors of this pretty meagre health Budget which the government could not have afforded in a crucial election year.

Neglect of allied sectors

Outlay on Integrated Child Development Services (ICDS) and other components of child welfare taken together (from here on, termed together as umbrella child welfare or UCW) increased from last year’s expenditures at constant prices. This was primarily due to upscaling the Indira Gandhi Matritva Sahyog Yojana (providing Rs 6,000 to women undergoing an institutional delivery and vaccinating their children) from pilot districts all over the country. This is a welcome and much awaited move (in spite of some of its flaws), though the quantum of provision (Rs 6,000), which was originally laid down in the National Food Security Act in 2013, should have been increased. On the other hand, allocation in core ICDS (anganwadi services) at constant prices barely increased from last year’s expenditures and the overall trend from 2013-14 till this year shows a yearly decline by 5%.

A damning Niti Ayog Report of 2015, based on a rapid survey, showed that around 41% of anganwadis have inadequate space, 71% are not visited by doctors, 31% have no nutritional supplementation for malnourished children and 52% have bad hygienic conditions. Given this abysmal state, setting up of mahila shakti Kendras in 14 lakh anganwadi centres – as highlighted by the finance minister – with a measly allocation of Rs 500 crore (Rs 3,600 per anganwadi for a year) is a mere eye wash. ICDS anganwadi service today requires a comprehensive overhaul with substantial increase in outlay.

In comparison, food subsidy and MNREGA appear to be in a slightly better position, with a minor annual increase in expenditure (at constant prices) between 2013-14 and 2017-18 by 8.5% and 6.3% (CAGR). However, at constant prices, this year’s allocation in MNREGA has declined from last year’s expenditures while food subsidy, which is marginally higher than last year, has declined from expenditures of 2015-16. Health and nutritional status heavily depend upon these allied sectors and their continued neglect is a concern.

Note: Umbrella child welfare and anganwadi services in secondary axis.
Source: Union Budget documents.

Lacking public health perspective

This year’s Budget thus continues with the policy of promoting high-end medical care services while ignoring primary care sector and other broader non-medical inputs of health. These sectors are crucial in improving the performance of health systems, which the NHP 2015 aims for. The long standing promise of ‘universal, free, comprehensive primary healthcare services’, which even the draft NHP 2015 reiterates, still goes unattended while the institutional and human resources priorities respond to the demands of a growing medical market.

Upgrading district hospitals into medical colleges might go a long way in creating additional 5,000 post graduate seats per year as highlighted by the finance minister’s Budget speech, but it still may not accomplish the objective of filling the shortage of specialist doctors in public institutions. Proliferation of a largely unregulated private health sector, with its profits unchecked in absence of a robust public sector, will still attract more doctors, particularly when public sector posts are becoming contractual.

While there is indeed a need to expand public hospitals, it cannot be made at the cost of the primary sector. The poor incur huge out-of-pocket expenditure not only for illnesses that require hospital services, but also due to the unavailability of free primary care. Some even fall sick in the first place due to poor nutrition, particularly children and pregnant women. The public secondary and tertiary care hospitals are clogged up with cases that are preventable at anganwadi centres or treatable at a primary level. A lopsided expansion of high-end hospitals and only some upgradation of existing district hospitals without paying heed to the problems of public health and primary care sector, and no real expansion of first-referral care at the CHCs will only perpetuate this problem. The tragedy is that due to such misallocation of resources, these paltry increases in allocation in public healthcare will not yield any visible benefit to a large section of the population.

Sourindra Mohan Ghosh is PhD scholar at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi and a consultant at the Council for Social Development. Imrana Qadeer is retired professor at the department of social medicine and community health, Jawaharlal Nehru University and distinguished professor at the Council for Social Development, New Delhi.

Watch: M.K.Venu and Govindraj Ethiraj Discuss 2017 Budget

M.K. Venu, founding editor of The Wire, in a discussion with journalist Govindraj Ethiraj on the nuances of this year’s Budget.

With Budget 2017, Modi Government Has Taken Key Steps to Improve India’s Tax Structure

The finance minister’s announcements on moving towards a more progressive direct tax structure and tax incentives for MSMEs are heartening.

Finance minister Arun Jaitley arrives at the parliament to present the federal budget, in New Delhi, India, February 1, 2017. Credit: Reuters/Adnan Abidi

This is the second article in a two-part series on analysing the announcements made in the finance minister’s Budget presentation on February 1. Read the first part here.

In a recent analysis on the Budget (part one of this series) covering the fiscal expenditure side, I examined the budgetary approach used by the finance minister and his team in announcing increased rural spending while neglecting the evidence presented from (un)achieved outcomes on existing social security welfare schemes for areas like agriculture sector, rural education, healthcare and skill development. However, if we study the announcements made on the fiscal revenue side, the minister’s approach this year brings more positive news, based on the tax proposals announced with more incentives provided for small businesses and the MSME (micro, small and medium enterprises) industrial base.

For any successful counter-cyclical fiscal spending policy to be in place, it is critical to ensure a wider tax base for a reliable source of tax revenue, a fairly distributive weight of tax structure (between direct and indirect taxes) and a consistent level of business confidence across sectors to raise government’s revenue capabilities (discussed here). The job of any big government here becomes important more as an enabler than merely act as a regulator or planner.

In India’s own economic history of policymaking (since independence), the government has largely projected itself as a planner and regulator for most of the times while acting as an enabler for a handful of sectors (like telecom, IT, automobile, pharmaceuticals and so on). With this Budget, we see a change in that attitude, from an economic policy roadmap presented while strengthening its fiscal revenue side of the balance sheet.

A smooth passage for the GST over the coming months will hopefully streamline some unwarranted indirect taxes, cesses, surcharges and so on in fairly distributing weight of taxes between the direct and indirect tax structures (discussed in an earlier article). This, of course, follows from an assumption that the government will continue to gradually increase its direct tax base by reducing tax rates in various income slabs over the coming years (similar to the ones announced for this year) and compliment it with a reduction in overall the indirect tax rate structure while more people are encouraged to pay direct taxes where the incidence of tax remains progressively sloped. This process will surely take time, but ensure a more progressive tax structure and administration base.

The table below offers more details on tax rates, slabs and filing of tax returns that reflects government’s seriousness in addressing the tax structure by reducing the direct income tax (for slab between Rs 2.5-5 lakh) to 5% of taxable income and putting a surcharge on the super-rich.

Additionally, in driving growth from greater physical capital accumulation, a 25.4% overall increase in capital spending on infrastructure combined with the abolishment of the Foreign Investment Promotion Board will be seen as a net positive for foreign investors keen in investing within India over the next few years.

A word of caution

Albeit, one area where the government should remain cautious is not to become over-reliant on foreign sources of investment over time in trying to bridge the domestic savings-investment gap (explained in an earlier article here) or ignore the trends of under-consumption currently prevailing across sectors in a post-demonetisation economic landscape.

The finance minister also seemed to make most of his tax proposal and fiscal outlay announcements partially based on a shaky hypothetical assumption of a widening tax base (as a result of demonetisation, discussed below). This further warrants a confab on the Economic Survey report on demonetisation that perhaps allowed the minister to make such announcements.

A few caveats: Reflections from the Economic Survey study on demonetisation

It is usual practice in discussions following the presentation of the Union Budget (for the first time this year announced on February 1) in India to pay limited attention to detailed findings and prescriptive solutions presented in the Economic Survey released a couple of days earlier. The survey prepared by the chief economic advisor (currently Arvind Subramanian) and his team presents a roadmap for the finance minister and his team in announcing various fiscal outlays and tax proposals in line with the broader macroeconomic realities listed in the survey’s analysis.

While this year’s survey can be complimented for its solid data analysis and raising key macroeconomic challenges for the Indian economy in the future, some questions can be raised on its chapter on demonetisation where some of the assumptions on widening the tax base (as a result of demonetisation, digitisation and the formalisation of the economy) were linked with a weak axiomatic reasoning in the model framework used for assessing demonetisation impact.

On the short-run impact of demonetisation

The economic assessment of demonetisation offered in this year’s Economic Survey is perhaps the first official government account that objectively seeks to analyse three sets of broader questions raised in recent months by the public debate on demonetisation; on assessing the administrative design and implementation of the initiative, the short and long run impact, and “its implications for the broader vision underlying the future conduct of economic policy”.

While the focus of analysis provided in the survey seems to look more at the latter two aspects, what seems missing in the analytics provided by Subramanian and his team, on the short-run impact of demonetisation, was the lack of a distinct sectoral focus on areas of agriculture, labour markets in the construction sector, real estate sector and so on, most affected under the government’s projection of demonetisation as a therapy that involved a vacuum suction of cash liquidity driving these sectors.

For instance on the real estate sector, the survey states, “An equilibrium reduction in real estate prices is desirable as it will lead to affordable housing for the middle class, and facilitate labour mobility across India currently impeded by high and unaffordable rents”. It is easy to see this observation as more of an opinion backed by hope of ceterus paribus (or all other factors remain constant) or an expectation of a linear direction without any reasoning provided for it.

While we do see a steep fall in real estate prices (from eight major cities) in India, the projected rise in demand of housing (stated above) over time remains conditional on factors like availability of home loans at affordable rates (assuming banks cut rates in expectation with rising demand amongst concerned income groups), a persistent rise in overall income and an easing of procedural formalities in property registration (which mandates state-level reforms), which are neither discussed nor included in a model of speculation.

Source: Economic Survey 2017-18

In fact, the survey accepts the ambiguous nature of analysis on any short-term assessment on demonetisation by stating, “…demonetisation represents a large structural shock so that underlying behavioral parameters of the past will be imperfect indicators of future behavior and hence outcomes”, which somewhere makes it difficult to put much faith in the analytics of assessment done.

One cannot blame either Subramanian or his analytics team for this, as the information available on the collection of data needed for doing any cost-benefit impact of demonetisation remains a work in progress. It may take more than six months to realistically know its actual short-run impact.

However, what remains troubling is the focal point of assessment provided in the survey in its approach and the subtle negligence on studying the likely impact of demonetisation on the dynamics of the agriculture sector (where most of the rural workforce is still occupied) and the informal segment of the construction sector where most of the semi-urban low skilled labour force gets employment.

A mere industrial firm-level focus in any short-term impact assessment without studying the most cash-intensive sectoral areas offers a weak analytic base.

Despite some of these shortcomings, overall, in making an effort to formalise India’s market economy and trying to improve its complicated tax structure, the 2017 Budget takes a key step forward.

Deepanshu Mohan is assistant professor of economics at Jindal School of International Affairs, O.P. Global Jindal University.

Modi Government’s Budget Estimates Expose Lack of Gain From Demonetisation

The Budget estimates of gross tax revenues for 2017-18 are the same as the revised estimates for 2016-17 – 11.3% of GDP.

File photo of Prime Minister Narendra Modi and finance minister Arun Jaitley. Credit: Reuters

The major national dailies have hailed Budget 2017 as a ‘safe’, ‘no-nonsense Budget’ that is also ‘wooing have-nots, hitting have-notes’. But how can a Budget be ‘prudent’ and ‘populist’ at the same time? The mainstream media is unwilling to independently analyse the economic situation and assess the Budget. It is neither looking at the numbers carefully nor asking the obvious questions. Spin doctors of the government are holding sway.

Budget 2017 has come in the backdrop of demonetisation, which invalidated 86% of India’s currency in circulation in one stroke, ostensibly to unearth ‘black money’ and nullify counterfeit currency. The question that naturally arises is, how much ‘black money’ has been unearthed and confiscated? In other words, what is the magnitude of the fiscal gain from demonetisation?

Nominal estimates

Finance minister Arun Jaitley’s Budget speech provides some figures through which he showed how “we are largely a tax non-compliant society”. The big data collated by the government on millions of deposits through which nearly Rs 15 trillion was deposited between November 8 and December 30, 2016, is supposedly going to help the government in “expanding the tax net as well as increasing the revenues”. The figures provided in the Budget documents, however, do not reflect any substantial revenue gain, either in the current or the next financial year.

The table below provides the nominal estimates of revenues, public expenditures and fiscal deficit for all the Budgets presented under the present government. Three facts are particularly noticeable. First, while gross tax revenues have grown by around 37% between 2014-15 and 2016-17, in those two years excise duties have grown by a whopping 104%, service tax by 47%, income tax by 33% and corporate tax and customs duties each by 15%. Thus, the growth in gross tax revenues under this government has occurred mainly on account of indirect taxes. Non-tax revenues, which include profits/dividends from CPSEs and economic services, have also grown at 69%, which is much higher than the growth in direct taxes.

Second, the corporate and income tax numbers for the Budget estimates and revised estimates of 2016-17 are almost the same. Given that the Union Budget was brought forward this year, the government may not have been able to provide proper revised estimates of direct tax collections for the full financial year. But this does raise serious doubts regarding revenue gains accruing to the government following demonetisation, plus the two income disclosure schemes that were announced in the current financial year. The first income disclosure scheme has reportedly yielded over Rs 30,000 crore to the government. Demonetisation and the second disclosure scheme were expected to bring in another sizeable windfall. Why then has income and corporate tax collections in 2016-17 not surpassed the Budget estimates by an indicative margin? It is clear that official expectations in this regard have been belied for the current financial year.

The third noteworthy fact is that the Budget estimates for 2017-18 reflect a shift in the revenue mobilisation strategy of the government. Growth rates of excise duties and service tax, which have yielded the lion’s share of revenue growth till 2016-17, are projected to slow down considerably to 5% and 11% respectively in 2017-18. The Budget has also given tax breaks on income and corporate taxes. On the basis of the expected widening of the direct tax base in the next financial year, income tax collection is projected to grow by 25% and corporate tax collection by 9%. Not only does this reflect the very limited extent to which the government expects the direct tax base to expand, the projected nominal GDP growth of 11.75%, on which direct tax growth will depend, also seems to be on the higher side.

Nominal GDP growth has ranged between 10% to 10.7%, from 2013-14 to 2016-2017. If the Budget’s optimism regarding a global growth recovery pulling up India’s exports and the digitisation drive spurring domestic investment fails to materialise in 2017-18, the direct tax projections can also turn out to be overestimates.

Real estimates

Even if the Budget estimates of direct tax revenues for 2017-18 materialise, can it be considered as a fiscal windfall which can justify the economic costs of demonetisation? From the table below, which provides real estimates of revenue and expenditure figures of the Budget (nominal estimates deflated by current GDP), it can be seen that the Budget estimates of gross tax revenues for 2017-18 are the same as the revised estimates for 2016-17; 11.3% of GDP.

Direct tax revenues are projected to increase from 5.6% to 5.8% of GDP, while indirect taxes are to fall from 5.7% to 5.5% of GDP. Non-tax revenues are also projected to fall from 2.2% to 1.7% of GDP. Thus, the revenue gains the government is expecting out of the demonetisation exercise in the next financial year would be barely enough to compensate for the declining growth in indirect taxes (excise duties) and would fail to compensate for the decline in non-tax revenues.

The latest Economic Survey has admitted that nominal GDP growth in 2016-17 would be lower by upto 1% due to the impact of demonetisation. Can this loss of economic activity be justified against a mere 0.2% of GDP gain in direct tax revenues in 2017-18?

The real expenditure figures also reveal that this government is following a contractionary fiscal path. The Budget deficit has been brought down from the average of 5.3% of GDP under the UPA-II regime to 3.5% of GDP in 2016-17 and is projected to fall further to 3.2% in 2017-18. Deficit reduction has been achieved through compression of revenue expenditure, which has fallen from 13% of GDP under UPA-II to 11.5% of GDP in 2016-17. Notably, this expenditure compression is projected to continue in 2017-18, not only vis-à-vis revenue expenditure, but also capital expenditure.

The Economic Survey has noted the sharp decline in real investment rate, both private and public, in the first half of 2016-17. The private corporate sector is faced with a debt overhang, with bank NPAs reaching 8.4% of GDP. Compressing public expenditures and reducing the fiscal deficit in such a backdrop can only hurt economic activity and reduce growth. Unfortunately, the policy establishment as well as the mainstream media is so enchanted with the narrative of India being ‘the fastest growing major economy in the world’, that such fiscal conservatism is being celebrated, even after the deflationary shock delivered by demonetisation.

Government’s oil revenue bonanza

While demonetisation has failed to generate any fiscal bonanza, this government has already enjoyed the fruits of substantial revenue gains, cashing in on the sharp fall in global oil prices. The increase in gross tax revenue-GDP ratio under the present government, compared to the UPA-II regime, is mostly attributable to increased revenues from excise duties till 2016-17 . This increase in excise duties has mostly accrued from the petroleum sector.

Central government revenues (as % of GDP). Source: Union Budget documents

The table below shows that central taxes and duties on crude oil and petro-products rose from 0.9% of GDP in 2013-14 to reach 1.6% of GDP in the first half of 2016-17, with excise duties on petro-products alone rising from 0.7% to 1.4% of GDP. Together with dividends and direct taxes, the petroleum sector contributed almost 1.9% of GDP in revenues to the central exchequer in 2015-16 and 2016-17. It is also noteworthy that while the sector’s contribution to the central exchequer grew dramatically from 2015-16, its contribution to the state governments’ treasuries has fallen as a ratio of GDP. It is the central government that has milked the petroleum sector over the past three years through indirect taxation.

This could be done without causing inflationary pressures in the economy because global oil prices fell quite sharply. The chart below shows that while annual average price of crude oil sharply fell from $105 per barrel in 2013-14 to around $46 per barrel in 2015-16 and 2016-17, the retail price of petrol and diesel (in Delhi) came down slightly from around Rs 73 and Rs 55 per litre respectively in March 2014 to Rs 60 and Rs 48 per litre in March 2016, and has once again risen to Rs 71 and Rs 59 per litre respectively by end-January 2017.

Imported crude oil and retail oil prices in India. Source: Petroleum Planning & Analysis Cell, Ministry of Petroleum and Natural Gas
* Average of monthly prices from April to March (January for 2016-17)
** Retail Price on March 31 (January 31 for 2016-17)

Since 2014, excise duties on petro-products have been increased nine times by the government. The central government currently charges Rs 17.33 for every litre of diesel and Rs 21.48 for every litre of petrol as excise duty. The successive hikes in excise duties on petro-products have resulted in a fiscal windfall, which has been used to gradually reduce the fiscal deficit, without resorting to drastic reduction of real government expenditures compared to level of the UPA-II regime. However, with global oil prices already firming up with a revival of growth in the advanced economies, this revenue mobilisation strategy has become unsustainable.

The price of imported crude has already crossed $54 per barrel. Continuation of this upward trend in oil prices will not only have ramifications for the Indian economy in terms of inflation and widening current account deficit, but will severely affect the tax revenues of the government. This realisation must have played a role in the shifting the resource mobilisation strategy of the government, from indirect to direct taxes. However, it should be amply clear from the nominal and real revenue estimates provided above that there is practically no possibility of a direct tax windfall from ill-conceived measures like demonetisation.

Prasenjit Bose is an economist and political activist.

How Did the Finance Ministry Get Such Incredibly Accurate Revenue Budget Estimates?

Were the budget estimates for corporation and income taxes in 2016-17 a typographical error or have they been carefully massaged?

Were the budget estimates for corporation and income taxes in 2016-17 a good coincidence or were they supposed to have been be qualified with a note?

Budget miscalculations? Credit: Reuters

New Delhi: For the first time in at least ten years, the budget estimates (BE) of India’s corporate tax and income tax revenue receipts have exactly matched their corresponding revised estimates (RE) – give or take a couple of decimal points.

A key part of every Union Budget is the receipt budget, a quick summary of how much tax and non-tax revenue the government was able to collect over the last year. It also includes capital receipts.

While tax revenue is further broken down into ten different categories, the two biggest sources of this revenue are ‘corporation taxes’ and ‘taxes on income’. The receipt budget for 2017-18 breaks down the 2016-17’s budget estimates and revised estimates for all tax revenue receipts.

For 2016-17, the budget estimate (BE) for corporate tax revenue was Rs 4,93,923.55 crore. The revised estimate (RE) is Rs 4,93923.50. That’s a difference of less than one crore rupees. Corporation tax revenue is broken down into four categories – collections, surcharge, education cess and miscellaneous receipts.

For 2016-17, the BE for taxes on income – which includes collections and surcharges as well as a whole host of other taxes including the security transaction tax – was Rs 3,53,173.68 crore. The RE for the same category in the same year is Rs 3,53,173.70. Again, a difference of less than one crore rupees.

Financial Year	Corporate Tax Receipts (Rs crore)		Income Tax Receipts (Rs crore)
	(Budget Estimate)	(Revised Estimate)	(Budget Estimate)	(Revised Estimate)
2016-17	493923.55	493923.50	353173.68	353173.70
2015-16	470628.00	452969.68	327367.00	299051.24
2014-15	451005.00	426079.00	284266.00	278599.00
2013-14	419520.00	393677.00	247369.00	241691.00
2012-13	373227.00	358874.00	195786.00	206095.00
2011-12	359990.00	327680.00	172026.00	171879.00
2010-11	301331.00	296377.00	128066.00	149066.00
2009-10	256725.00	255076.00	112850.00	131421.00
2008-09	226361.00	222000.00	138314.00	122600.00
2007-08	168401.00	186125.00	98774.00	118320.00

A quick look at the differences between BE and RE over the last two years, for these two revenue receipt categories, shows that usually the BE is off by anywhere between Rs 5,000 crore (in a handful of cases) to Rs 20,000-30,000 crore.

“This is certainly unusual. I don’t think I’ve seen this before, where both corporate tax and income tax almost exactly match up,” said a senior economist, who has helped formulate previous Budgets.

What explains these extremely accurate budget estimates for 2016-17? Multiple economists The Wire spoke to pointed out that there were a handful explanations. The simplest reasons include it being an error or a coincidence – and that the “actuals for 2016-17” that will come out next year will be different.

Another explanation is that because the Budget was moved up (and its date was in doubt due to other issues such as the Election Commission’s verdict), the revised estimates might not be as accurate as it was for other years.

“There could be some factors, such as not knowing how much revenue the second income disclosure scheme will come in and so on. Moving up the Budget date might not have helped. However, in this cases they should really have put an asterix on these numbers and qualified it through a note at the end of the document, saying that the calculations came out like this because there is some uncertainty,” a former chief economic adviser told The Wire.

Yet another explanation is that the numbers are just downright wrong or have been massaged. The head of a finance policy think-tank told The Wire that some numbers should be ideally taken with a “pinch of salt”.

“A 1 crore difference? Are you kidding me? After the budget came out I called up and spoke with finance ministry officials and they said that they are sticking by these numbers. Some of these numbers, in most Budgets, you can’t take just at face-value and this is largely known,” the think-tank head’s said.