Focus back on raising revenue

With the fiscal deficit target staring at the government, the FY25 Budget has limited expenditure options

- A K BHATTACHARYA

How have the Modi government's budgets fared in the last 10 years? One way to answer that question would be to compare them with those of the previous governments. But another way would be to evaluate the Modi budgets inter se. The latter exercise could be more useful in the current context. Since not much has changed in the Modi government after the last general elections (even the top budget team in the finance ministry has remained the same!), it would be instructive to assess how the budgets of the last 10 years looked at basic fiscal governance issues and how these could be an important pointer to the kind of Budget that Finance Minister Nirmala Sitharaman is likely to present on July 23.

Let us begin with the size of the government. The total expenditure of the Union government in 2014-15 was as large as 13.34 per cent of gross domestic product or GDP. Over the next four years, this was brought down to 12.25 per cent of GDP by 2018-19. Notably, this reduction was achieved through a welcome squeeze on revenue expenditure, while capital expenditure remained broadly unchanged during these five years at between 1.5 per cent and 1.8 per cent of GDP.

The pre-Covid year of 2019-20 and the Covid year of 2020-21 saw an understandable spike in government expenditure to 13.4 per cent and 17.7 per cent of GDP, respectively, fuelled largely by a rise in revenue expenditure and a small increase in capital expenditure. But what ignited hope was the government's decision in the following three years to steadily reduce its total expenditure to 15 per cent of GDP by 2023-24.