India is brilliant, they’re going to tell you in the news tomorrow. But what really has happened in the last year is absolute carnage, in terms of both revenues and expenses of the Central Government.

Revenues Down 63,000 Crores

If you look at revenues, most of the money comes from taxes, some from non-tax revenue.

image

We missed budget estimates of Corporation Tax (meaning, what companies pay as taxes) by Rs. 25,000 cr.

The Indirect tax hit was huge:

  • Customs duty lower by 13,000 cr. – probably because of curbs on gold, one thinks.
  • Excise duties down by 21,000 cr. and this is what tells you Manufacturing is in the doldrums.
  • Service Tax, the stuff that is supposedly “buoyant” in the economy (the service sector) saw nearly 48,000 cr. lower revenue!

The big surprise is Service Tax – how could we have such a big miss? The collections are low, and tremendously low, in a year where we should have seen the service sector boom (elections, huge market surges, potentially increased sales and so on)

Only “Non Tax Revenues” were okay, and that too because of large dividends by the PSUs and some auctions.

In all, we were 63,000 cr. lower than estimates.

Why are we saying all of this? Because even Revenues going forward (in the budget for next year) are estimates. If we missed them by such a massive amount, we will be in serious trouble.

To Compensate, Expenses were Cut Drastically

We supposedly wanted to compensate for revenue misses and also a lower deficit number. So expenses were even further lower, by over 100,000 cr.

image

We:

  • Had lower interest payments by 15,000 cr. (from a falling yield curve)
  • Saw subsidies go UP by 6034 cr. (What happened to fuel savings?)
  • Had to cut Defense Capex by 12,600 cr.
  • And then the big thing: Plan Expenditure was down by over 107,000 crores.

Plan Expenditure is the outlay by the Center (and also by the states) to meet plan targets, with programs etc. We had to cut that down in order to meet the lower revenue numbers and make the deficit targets.

India’s Doing Just Fine?

It’s important to have a positive outlook, but let’s stop bullshitting ourselves that everything is just fine. We just saw a huge revenue miss, had to cut expenditure by more than a trillion rupees, and we just about scraped through this year.

The next year’s budget is, in that context, mega challenging. We’ll come to that, in the usual Capital Mind way of using public data to frame our insights.

divider

Subscribe to Capital Mind:

To subscribe to new posts by email, once a day, delivered to your Inbox:

 

Also, do check out Capital Mind Premium, where we provide high
quality analysis on macro, fixed income and stocks. Also see our
portfolio which has given stellar returns in our year, trade by trade
as we progress. Take a 30-day trial:

Now, tell them about it: