After the Union Budget emphasised growth and increased allocation of capex spending to states, revenue secretary Tarun Bajaj on Wednesday said that the fiscal deficit target for next year is 6.4 percent. He said if the government had not set aside Rs 1 lakh crore for the states, the deficit could have been much lower at 6.0 percent.
Talking to industry leaders at a CII post discussion event, Bajaj said, "After unleashing a set of reforms last year, this year's Budget laid emphasis on growth, went a step ahead to increase the allocation of capex, and also allocate spending to states. The fiscal deficit for Financial Year 2022-23 is budgeted at around 6.4 percent, which would have been down to 6 percent if the allocation of Rs 1 lakh crore was not made to the states."
Bajaj elaborated that while the government has brought pathbreaking measures, the fillip that the government wants to give will be through this capital expenditure is visible.
"The multiplier effect of capex is more than that of the revenue expenditure. I had analysed that a lot of spending needs to go towards infrastructure," Bajaj said.
He decoded his revenue projections and said, "On the tax side, I should admit, there are areas where work is in progress, and they will be done over the next few budgets. The government has extended the date by which the industry can set up manufacturing units to March 31, 2024."
Bajaj also asked the industry to take advantage of the extension given by the Budget so that more manufacturing units could avail the benefits under the new corporate tax regime.
"That was extended because there was a demand from the industry due to Covid impact. I would now say there is a big push on capex, and there will be a push on both the demand and supply sides. The capacity utilisation would improve for the corporate sector. When I interact with the industry, I understand many have capex plans. 2024 is more than two years from now, and capex will give a big push," Bajaj said.
He was mindful of the observations made by industry leaders on challenges towards implementing the Budget announcements.
"I agree the challenge in our country is the implementation of Budget announcements. It is easier to make announcements, but it isn't easy to implement them. I want the industry to keep reminding me of what has not been implemented so that I push my people," Bajaj said.
Commenting on the revenue estimates, which the industry claimed to be too conservative, Bajaj said: "I did not expect this kind of revenue buoyancy, especially during COVID. The revised estimates of gross tax collections are almost Rs 3 lakh crore more than the budgeted estimates.
If we had shown that this Rs 3 lakh crore is budgeted estimates, people would have said that you are back to the game by showing revenues that you will never achieve. So, my base has now really gone up."
He shared that the current tax to GDP ratio is highest or one of the highest that the country has seen in the recent past.
"If I take out the excise duty, then my growth is 12.4 percent. One point I have not mentioned until now is that I will get good revenue from the capital gains tax. Although the rates are much lower, we should get Rs 60,000-80,000 crore, which is what estimates say. Last year, this was only Rs 6,000-8000 crore, so that has also made a huge difference."
He also shared that some external factors have also been accounted for while keeping the estimates a little on the lower side.
"Given the tapering happening, rates going up in the US, one doesn't know how the markets will play up. We expect the market to play in the sense that if the corporate sector does well, markets should do well. But one doesn't know. The thing is that we should do 12.4 percent, and I hope I am proved wrong, and you all are proved right that we do much better than this."
"So one of the things you must have noted is that given the revenue buoyancy, my fiscal deficit sits at the same because of the increase in expenditure. Once the fiscal deficit is not going down because the extra expenditure is going up with the revenues going up," Bajaj added.
He shared that North Block intends to give relief to those who need it if revenue goes up.
(Edited by : Amrita Das)
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