Non-tax revenues hold key to meeting budget targets

Mumbai, Feb 02 (PTI):
Lauding the budget focus on nursing the nascent growth revival at the cost of fiscal consolidation, house economists at a Swiss brokerage has said budgetary math seems realistic but meeting privatisation targets are key.
Without increasing taxes and imposing new levies, the budget is focused on strong capex, which is the highest since FY08, and projected a fiscal deficit target of 6.8 per cent for FY22 as against a consensual 5.5 per cent and 9.5 per cent for FY21 as against 7.5 per cent and a budgeted for a Rs 34.5-lakh-crore budget expenditure, up from Rs 30.8 lakh crore in FY21.
FY22 budget math seems realistic, though privatisation targets are key and therefore we maintain our base case of a strong recovery in FY22 GDP growth to 11.5 per cent. We also believe the budget is laying the groundwork to help the country move towards a 7.5 per cent plus growth in the medium-term, Tanvi Gupta Jain, the economist at UBS Securities India, said in a note.
The revenue collection assumptions (revenue receipts projected to rise by 15 per cent in FY22 as against the nominal GDP growth of 14.4 per cent) used to arrive at the FY22 fiscal targets also look reasonable, she said, but adding the government continues to rely on one-off revenue receipts including dividend transfer (Rs 1,03,500 crore) and divestment (Rs 1.75 lakh crore) given the weak track record, it will be interesting to see if the divestment target is met this year.
Stating that the budget 2021 is all about growth, she notes the finance minister has pursued an expansionary fiscal policy to boost the nascent economic recovery with growth-boosting measures like the highest capex since FY08 when the fiscal deficit was at the lowest on record at 2.5 per cent), higher allocation for healthcare, added focus on divestment and asset monetisation, hiking FDI in insurance to 74 per cent, increased allocation for PSB recapitalisation (Rs 20,000 crore) along with a proposal to privatise two state-run banks.