Beyond Euphoria: What the Budget Has in Store for the Future
As the nation stands in awe of yet another Union Budget, the purpose of this article is not to appraise the budget announcements but, rather, to look at a few numbers and put across a perspective that a global appreciation or criticism of the Budget would not.
There has been predictable euphoria about the increase in government expenditure in the revised estimate (RE) of 2021-22 and the whopping sum put aside in 2022-23, especially towards capital spend. While little can be said against the need for the government to accelerate spending, especially on the capital side to crowd in the private investment that has been slack, the flip side of the coin of how the government would find the resources to spend, would be an inevitable question.
It is more than a trifle forbidding, should one look at the pace at which the country’s indebtedness has been expanding. The Budget documents estimate a Central government debt of Rs87.09 trillion at the end of the 2022-23 Budget period which has grown in absolute terms by about 130% since the period of 2014-15. Comparable gross domestic product (GDP) growth during the same period is about 108%. The debt increase in percentage terms is clearly outstripping the pace of GDP growth.
There may be a comfort that the Union government’ debt alone is still lower than that of many other countries. However, the aggregation of debt of the states and the public enterprises may dilute that comfort as well. This is a subject that should concern the experts and a deeper study is necessary to look at the trend and the likelihood of the situation spinning out of control.
The growth in debt levels brings up the concomitant issue of the behavior of the tax revenues. There has been considerable thumping of the desks on the buoyancy of the goods and services tax (GST) revenues in the recent months. 
The picture on tax revenue hardly reflects a sanguine picture as the needle looks unmoved on the tax-to-GDP ratio which is almost stationary around 10% in the years between 2014-15 and 2022-23 Budget estimate (BE).
The indirect tax component, which is currently dominated by GST, has grown at a rate of 161% in absolute terms in a seven-year period, as compared to a mere 100% increase in direct taxes. It hardly needs deep knowledge of economics to appreciate that indirect taxes are inflationary and affect the poor directly.
It is surprising that the Budget documents have given little attention to the subject of disproportionate wealth accumulation in the country and the possible options to improve the direct tax support to the revenue mobilisation efforts.
The continued reliance on cesses and non-shareable taxes with the states keeps alive the contested issue of fiscal federalism; the redeeming point is that the proportion of shareable taxes has moved closer to 30% of total taxes collected by the union as compared to about 27% in 2014-15.
While the thrust of the Budget to induce growth through higher spending by the government is well directed, the risk of the current compulsions putting the future generations in unsustainable debt should season the policy options. 
Further, the lack of effort to increase sustainable sources of revenue of the Union or facilitate options for the states to manage their finances better, rather than merely applauding the headline announcements, should inform the ongoing debate. The figures used in this article are picked up from the Budget documents and have been used in the table below.
Change in revenue profile, debt and transfer to states (Rs lakh crore) 
(Ranganathan V is a CA and CS. He has over 43 years’ experience in the corporate sector and consultancy. For 17 years, he worked as Director and Partner in Ernst & Young LLP and three years as senior advisor post-retirement handling the task of building the Chennai and Hyderabad practice of E&Y in tax and regulatory space. Currently, he serves as an independent director on the board of four companies.
2 years ago
1. GST are inflationary and affects power but it is the one reason among others. When people's purchasing power increases, so will GST .
2. The purpose of the budget is specific and not to address wealth inequalities, this has always been a issue in all developing countries
3. While the author is scorned by desk thumping , what he doesn't see is the fiscal burden borne by the centre as GST compensation despite Force Majure - #covid19 , Vaccine costs , in compensating and additional loan of 1lac crore interest free for 50years
4.It is the primary responsibility of the states for fiscal prudence and streamline their capital outlay and debt structure , rather than politicising every GST . Failing which Centre will contine to compensate states for enternity at the cost of Growth
Overall a good political view from a retired CA on economics
2 years ago
The problems seems to be the extremely high cost of building infrastructure that too with borrowed funds and taxes.
The revenue earned is negligible to further aggregate it .
Moving potatos by road from one end of the country to another by road is senseless
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