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The state election results may provide a blueprint to the Narendra Modi government for the national elections, with freebies or welfare schemes likely to form part of the interim budget for 2024-25.
Increased collection of GST and personal income tax can provide support to the Narendra Modi government to announce schemes or improve existing ones, such as an increase in allocations to Prime Minister Kisan Samman Nidhi, schemes related to women, youth and disadvantaged sectors, tax cuts. on petrol and diesel, an increase in funds for MNREGA and a further reduction in prices of liquefied petroleum gas (LPG) cylinders.
Despite a drop in tax collections from corporate tax, central GST, Union excise duty and customs duty in October ahead of devolution to states, overall tax revenue rose around 14 per cent. cent to Rs 18.3 trillion during April-October of the current financial year. as against Rs 16.1 trillion during the corresponding period of FY23. This was higher than the 10.44 per cent growth in tax collection projected in the union budget for 2023-24.
In fact, the manner in which the fiscal deficit was contained in the first half of the current financial year provides the government with leverage to announce pro-people plans in the interim budget.
The Center has controlled its fiscal deficit to 4.9 per cent of the gross domestic product (GDP) during the first half of the current financial year. The Budget projected the deficit at 5.9 per cent of GDP for the entire period 2023-24. The deficit was much larger, at 6.4 percent of GDP in the first quarter, but was effectively controlled at 3.5 percent in the second quarter.
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Part of the reason was a larger deficit of Rs 4.5 trillion in the first quarter than of Rs 2.5 trillion in the second quarter, as well as lower GDP growth at current prices (8 percent during April-June than 9.1 percent during July-September). of FY24. However, GDP growth at current prices in each quarter was lower than the 10.5 per cent projected in the 2023-24 budget.
Most recently, GST collections rose 15 per cent year-on-year (YoY) in November – the biggest increase for any month this financial year – to Rs 1.68 trillion. Of this, central GST collection, after settlement of integrated GST, rose 14.4 per cent to Rs 68,297 crore in the month.
The Center has already announced an extension of the free foodgrain scheme for over 800 million people over the next five years, which would hit the public exchequer by Rs 11.80 trillion. However, the burden would be only Rs 6,000 crore additional for the last quarter of the current financial year of the plan which was to end earlier this month.
However, economists warned authorities, both at the Center and states, against reckless giveaways.
For example, India Ratings chief economist Devendra Pant said Indian public finances, both central and state, are suffering from spending rigidity.
“The higher proportion of interest payments, salaries and pensions in current expenditure/revenue makes expenditure reforms difficult. State capital expenditure is strongly correlated with the revenue deficit situation,” he noted.
Pant said the populous schemes put pressure on the fiscal position of states and union governments.
“The government’s current spending, disproportionate to its current revenues, is likely to have a negative impact on capital spending, increasing debt and placing continued pressure on its fiscal position,” he warned.
The Centre’s debt is expected to rise to 57.2 per cent of GDP in the current financial year, up from 57 per cent in the previous financial year. The government’s liabilities in each of these two years were higher than those of 2009-10, except for the Covid-affected years 2020-21 and 2021-22 (more than 60 per cent). The Centre’s debt can be reduced this year compared to the Budget projections, if it maintains the first half-year trend of containing the fiscal deficit in the second half of the year as well.
The BJP has promised several programs and plans in the three states it won. For example, he promised to increase income support under the Prime Minister’s Kisan government to Rs 12,000 per eligible farmer in Rajasthan. Similarly, he promised an LPG cylinder for Rs 500 in Chhattisgarh. Her victory in Madhya Pradesh, despite about 20 years in power, is largely attributed to the Ladli Behen Yojana, a women-oriented scheme. The repercussions of all these plans and promises could also be seen at the central level.
On the impact of state poll results on central programs and plans, Gopal Krishna Agarwal, BJP’s national spokesperson looking after economic issues, said announcing new plans is not a moot point. It is the execution of Modi’s plans and assurances that have captured people’s imagination.
“The opposition did not have any road map for their promises. The plans promised by them were false. We focused on fulfillment. People knew that these were Modi’s assurances that would be fulfilled. People have recognized the difference between our promises and those of the opposition,” he said. saying.
He said Prime Minister Narendra Modi has already launched Viksit Bharat Sankalp Yatra, one of the objectives of which was to connect existing schemes with those who have not received their benefits despite being eligible.
