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LATEST NEWS UPDATES | Finance ministry has a poor forecasting record -Sharmadha Srinivasan, Prakhar Misra and Niranjan Rajadhyaksha

Finance ministry has a poor forecasting record -Sharmadha Srinivasan, Prakhar Misra and Niranjan Rajadhyaksha

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published Published on Jan 16, 2019   modified Modified on Jan 16, 2019
-Livemint.com

Given the over-optimistic revenue estimates and under-budgeted expenditure, the FinMin’s budget projections should be taken with a pinch of salt

Dark clouds are gathering over the fiscal horizon. Finance minister Arun Jaitley will table an interim budget on 1 February—just weeks before India goes to polls.

There’s a growing consensus among analysts that the government will miss its revenue target for the year, largely because the collections from the goods and services tax (GST) have been lower than expected.

The insipid revenue growth in fiscal year 2019 has also put a question mark on the government’s capacity to meet its fiscal deficit target for the year, unless there are unexpected revenue windfalls—or spending cuts.

The difficult transition to the new indirect tax regime is common knowledge. What is less known is that poor marksmanship has been a feature of Indian budgets over the past two decades.

Indian finance ministers have usually overestimated revenue and underestimated expenditure. In other words, Indian budgets need to be read with a sceptical eye.

We have here considered budget data from fiscal year 1998 to fiscal year 2017. The budget estimates for any particular fiscal year have been compared to the actual numbers released at the end of that particular fiscal year.

The finance ministry overestimated revenue receipts — or the sum of tax and non-tax collections—in 15 out of these 20 years. The three most important exceptions were in the fiscal years 2007, 2008 and 2011. The reason was a growth surprise combined with high inflation. The Indian economy was in the midst of an unprecedented economic boom in the first two cases and it saw a sharp recovery from the post-crisis slowdown in 2011.

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Livemint.com, 15 January, 2019, https://www.livemint.com/Politics/Ey6VRIMAozRK082XGruVbP/Finance-ministry-has-a-poor-forecasting-record.html?fbclid=IwAR0BIlrWcSUs9vyf8dfr2Zw8t4Z50wIPBGfcxlOiQ067KWkU0u


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