UNION BUDGET 2021-22
For mooring and berthing of massive vessel of economy, an annual budget operates as a tugboat which runs on energy of monetary initiatives
To decode a budget, we need not only to understand the rudimentary concepts and ideas which critically vitalize the processes and contours of budgetary planning but also need to have a futuristic perspective, researcher’s zeal as well as a clear historical sense.
The annual budget of the State aims at fiscal shaping as well as mapping and traversing the aspirational terrains of the society, with a focus on the value of continuity. A budget is not merely an exercise of accounting ingenuity. Accounting standards and practices, of course, constitute the grammar of the budgetary expressions.
A budget is also not a statistical theorem and an isolated solution-seeking endeavor in the limited templates of fiscal balancing. A budget is firmly founded on facts, unalloyed facts, and is a creative and compassionate narrative of the facts in the context of the challenges of time.
It is aptly said: facts are stubborn, whereas statistics are pliable. A budget arranges and moulds the stubborn facts in a narrative with a futuristic vision.
A question, not a rhetorical question that needs to be answered is: what a budget quintessentially connotes or symbolizes?
A budget is describable as a ‘fiscal paradigm’ shaped by thoughts rooted in political philosophy and invariably adorned with the crowd-invented, crowd-handled and crowd-funded designs and motifs fashioned by the specific streams of political architecture criss-crossing the society. It is an evolutionary outcome stemming out of annually revisited spectrum of political perceptions qua actual or perceived issues of scarcity and abundance. Thus by adopting choices and by eliminating choices, a ‘living script’ of the budget is legislatively adopted which spells out the warp and weft of the State strategy to actualize the politically perceived aspirations of the nation.
A budget, by accentuating or by muting particular choices, emerges as an instrument which epitomizes a candid expression of the context-specific statement of the government qua the solemn obligations of a Welfare State.
Destiny of a person or of a society is indeed shaped by its choice alone. Destiny of a State is co-related to the opportunities generated as well as the paradigms of resource sharing introduced in the fiscal structure by the State through the efficacy of the annual budget.
A budget is broadly founded on the following three financial segments:
- Consolidated fund
- Public account
- Contingency fund
A consolidated fund has two parts:
- Revenue Account
- Capital Account
The Consolidated Fund is State owned fund and operates as an incubation bed for the entire spectrum of budgetary transactions.
Public account represents the funds not owned by the Government but in the hands of the Government in trust for other entities. For example provident fund, pension fund, reserves and depreciation funds, deposits of Municipal Corporations etc.
The Contingency Fund is a dedicated reserve to meet urgent and emergency requirements in the course of affairs of the State. This fund is utilized with Cabinet approval while the legislative approval which is normal for budgetary allocations, is not ipso facto applicable to the Contingency Fund.
A few terms need to be clarified for understanding the fiscal statement:-
- Revenue Receipts: Revenue receipts are all those receipts, which do not incur repayment liability. The revenues (Tax and Non-Tax), share in central taxes, statutory and non-statutory grants from the Central Government and interest and dividend on investments made by the Government are reflected in the array of the revenue receipts.
- Revenue Expenditure: Revenue Expenditure covers all the run-of-the-mill and administrative expenditure, such as, salaries and wages, pension, interest payments, maintenance and repairs. Overheads like payment of rent, taxes and other establishment expenditure also form part of revenue expenditure.
- Capital Receipts: Capital receipts means loans raised by the Government from the market, borrowings from RBI and other institutions, loans from the Centre, receipts from special securities issued to NSSF and the recovery of its own loans as well as proceeds from disinvestment of Government’s stake in Public Sector Undertakings.
- Capital Expenditure: Capital Expenditure signifies expenditure towards creation of capital assets. The investment outlay on the acquisition of permanent assets like land, buildings, plant & machinery and all other physical infrastructure forms part of capital expenditure. Disbursements qua repayment of public debt and loans and advances made to the various entities, are also Capital Expenditure.
- Miscellaneous Capital Receipts (MCR): Non Debt Capital Receipts are classified in this category.
- Primary Deficit: Primary Deficit is Fiscal Deficit net of ‘Interest Payments and Debt Servicing’ under Revenue Component.
- Revenue Deficit: Revenue Deficit is the difference between Revenue expenditure and Revenue Receipts.
- Budget Deficit: Budget Deficit is the difference between total expenditure and total receipts and has to be zero, in the absence of monetization. Governments have no access to the monetization route and resultantly in the government calculus, Budget Deficit is necessrily zero.
- Fiscal Deficit: Fiscal Deficit is the difference between total income (total taxes and non debt capital receipts) and total expenditure.
- Finance Bill: Finance Bill is the Government’s proposal for the imposition of new taxes, modification of the existing tax structure or continuance of the existing tax structure for the specific period approved by the legislature.
The following two tables depict the overall statistical contours of the fiscal structure for the year 2021-22:
Table 1: A statistical apercu of Budget 2020-21
(Rs. in crore)
| Items | 2018-19
(Actuals) |
2019-20
(BE) |
RE 2019-20 (7 months) 1st April to 30th Oct, 2019 | BE 2019-20 (5 Months) 31st Oct to 31st March, 2020 | 2020-21 (BE) | |
| A. | Revenue Receipts | 51069 | 71193 | 27738 | 40498 | 91100 |
| B. | Revenue Expenditure | 55894 | 58442 | 28171 | 31407 | 62664 |
| Revenue Surplus (A-B) | -4825 | 12751 | -433 | 9091 | 28436 | |
| C. | Capital Receipts | 15939 | 13378 | 6393 | 5794 | 10329 |
| D. | Capital Expenditure | 11114 | 30469 | 5960 | 14885 | 38764 |
| Capital A/C Deficit (C-D) | 4825 | -17091 | 433 | -9091 | -28435 | |
| E. | Total Expenditure | 67008 | 88911 | 34131 | 46292 | 101428 |
| F. | Total Receipts | 67008 | 84571 | 34131 | 46292 | 101428 |
| G. | Fiscal Deficit | 13303 | 13996 | 6424 | 2191 | 10240 |
| H. | Unfunded/ Additional resources required | 0 | 4340 | 0 | 0 | 0 |
Fiscal deficit is difference between total income i.e. aggregate of total taxes, including corporation tax, income tax, custom duties, Union excise duties, GST & taxes of other territories besides other non debt capital receipts and total expenditure.
Table 2: Budget 2020-21-An Overview of Flux of statistics
(Rs. in crore)
| Items | RE 2019-20 (7 months) 1st April to 30th Oct, 2019 | BE 2019-20 (5 Months) 31st Oct to 31st March, 2020 | 2020-21 (BE) |
| Revenue Receipts
(i+ii+iii+iv+v) |
27738 | 40498 | 91100 |
| i. Own Tax Revenue | 6327 | 6894 | 13241 |
| ii. Non-Tax Revenue | 1036 | 3432 | 4065 |
| iii. Share of Central Taxes | 6762 | 5462 | 15200 |
| iv. Resources from Centre | 13513 | 23710 | 54794 |
| v. Additional Resource Mobilization (ARM) | 100 | 1000 | 4000 |
| Total Revenue Expenditure of which | 28171 | 31407 | 62664 |
| Interest Payments | 1737 | 1806 | 6891 |
| CSS | 581 | 2840 | 3009 |
| Total Capital Receipts | 6393 | 5794 | 10329 |
| i. Borrowings | 4008 | 4828 | 7917 |
| ii. Other liabilities of which Provident Fund (Net) | 2416 | 863 | 2323 |
| iii. Misc. Non-debt creating | -31 | 98 | 84 |
| iv. Recovery of Loans and Advances | 0 | 5 | 5 |
| Total Capital Expenditure | 5960 | 14885 | 38764 |
| i. Capital Expenditure | 3379 | 9800 | 28565 |
| of which: Repayments | 1023 | 1027 | 4248 |
| ii. CSS | 2581 | 5085 | 10199 |
| Total Expenditure | 34131 | 46292 | 101428 |
| i. Revenue Expenditure | 28171 | 31407 | 62664 |
| ii. Capital Expenditure | 3379 | 9800 | 28565 |
| iii. CSS Capex | 2581 | 5085 | 10199 |
| Total Receipts | 34131 | 46292 | 101428 |
| i. Revenue Receipts | 27738 | 40498 | 91100 |
| ii. Capital Receipts* | 6393 | 5794 | 10329 |
| Revenue Surplus | -433 | 9091 | 28436 |
| Unfunded/Additional Resources required | 0 | 0 | 0 |
| Fiscal Deficit | 6424 | 2191 | 10240 |
Central Government expenditure (in Crores)
| Sr. No. | Particulars | Amount |
| (i) | Pension | 2,10,682 |
| (ii) | Defence | 3,23,053 |
| (iii) | Major Subsidies | 2,27,794 |
| (iv) | Agriculture and Allied Activities | 1,54,775 |
| (v) | Commerce & Industry | 27,227 |
| (vi) | Development of North East | 3,049 |
| (vii) | Education | 99,312 |
| (viii) | Energy | 42,725 |
| (ix) | External Affairs | 17,347 |
| (x) | Finance | 41,829 |
| (xi) | Health | 67,484 |
| (xii) | Home Affairs | 1,14,387 |
| (xiii) | Interest | 7,08,203 |
| (xiv) | IT and Telecom | 59,349 |
| (xv) | Planning and Statistics | 6,094 |
| (xvi) | Rural Development | 1,44,817 |
| (xvii) | Scientific Departments | 30023 |
| (xviii) | Social Welfare | 53,876 |
| (xix) | Tax Administration | 1,52,962 |
| (xx) | Transfer to States | 2,00,447 |
| (xxi) | Transport | 1,69,637 |
| (xxii) | Union Territories | 52,864 |
| (xxiii) | Urban Development | 50,040 |
| (xxiv) | Others | 84,256 |
| Grand Total | 30,42,230 |
The aforesaid expenditure of Rs.30,42,230 Crore is met through the following resources:
| (i) | Revenue receipts | 20,20,926 |
| (ii) | Capital receipts | 10,21,304 |
| Total receipts | 30,42,230 |
With the aforesaid tabulated presentations at the hindsight, we need to dwell on the concepts of gross domestic Product, national Income, rate of growth, sector-wise outlays, critical issues of symmetry and asymmetry in fiscal momentum as well as the speed and direction of micro-economic initiatives spelled out in the statistical narratives by the budget 2020-21.
With regard to the budgetary figures, before embarking on the analytical exercises and statistical tables, the following eloquent words of Nani A. Palkhiwala elucidating the ground reality of the time, need to be imbibed in the perspective of an analyst ;
“Every budget contains a cartload of figures in black and white-but the stark figures represent the myriad lights and shades of India’s life, the contrasting tones of poverty and wealth, and of bread so dear and flesh and blood so cheap, the deep tints of adventure and enterprise and man’s ageless struggle for a brighter morn”.
Again reverting to Nani A. Palkhiwala to gain a further insight, we need to ponder over the timeless value of his profound utterance:
“Visionaries expect the finance minister to be the imaginative allocator of the nation’s financial resources and the oracular orchestrator of the people’s energies and enterprises, skills and disciplines. In practice, the minister is buffeted by the cross-currents of political pressures and by an unimaginable volume of contradictory advice proffered from all sides”.
Any person who picks up a copy of the annual budget for understanding or analysis must bear in mind that a budget cannot, in one stroke, quench the thirst of a dehydrated nation of 140 Crores. A budget can indeed put few drops of water through a dropper in every mouth.
A budget is not a magical instrument, which holds potential to reverse all hard-lined and deeply-entrenched negative trends of economy with a single punch. It is naïve to believe that any annual budget can magically put an end to the phenomenal size and scale of poverty, unemployment, stagnation or even inflation. Thus unrealistic narratives built on the basis of political expediency often lead the masses to futile day-dreaming and resultant pain.
An annual budget, even if hailed as historic, is seldom historic in true sense of the word. A budget in its multiple forms is quintessentially ephemeral in its functional and substantive themes and the impact of a budget, unless its consolidation-focus is robust and inexorable, appears and disappears in the economic trajectories, as that of a momentary fragrance of a perfume.
An analyst, in a lighter vein, once commented that if one is not confused by a budget, it necessarily means that he is not well-informed. Any exercise to simplify a budget, usually adds another layer of complexity to the fiscal statement.
The concept of egalitarianism, under rough and strident political noise, gets projected in the colloquial glossary as a pseudo-concept of State-dictated impoverishment of the rich and treacherous and unjust vilification of private sector. Thus politically-invented issues of asymmetry and economic balance often capture public imagination. Multiple confusions are politically introduced in reading and analysis of the budget, inter alia, on account of subtle but meaningful differences between ‘absolute figures’ and ‘inflation-adjusted figures’. Loud and noisy and high-decibel political utterances qua the self-styled thesis and anti-thesis of a particular budget are an annual carnival of democracy amongst the data-ignorant masses.
On the receipt side, the budget of FY 2020-21 shows the following breakup:-
| Sr.No. | Particulars | % of the Total receipts |
| 1. | Borrowing | 20% |
| 2. | Corporate taxes | 18% |
| 3. | Income Tax | 17% |
| 4. | GST & Other taxes | 18% |
| 5. | Union Excise duties | 7% |
| 6. | Non-Tax revenue | 10% |
| 7. | Capital receipts (non-debt) | 6% |
| 8. | Customs | 4% |
On the Expenditure side, the budget of FY 2020-21 shows the following breakup:-
| Sr.No. | Particulars | % of the Total expenditure |
| 1. | State share of taxes and duties | 20% |
| 2. | Interest payments | 18% |
| 3. | Central Sector Schemes | 13% |
| 4. | Finance commission & other transfers | 10% |
| 5. | Centrally Sponsored Schemes
(as mentioned hereinafter) |
9% |
| 6. | Defence | 8% |
| 7. | Subsidies | 6% |
| 8. | Pensions | 6% |
| 9. | Other Expenditure | 10% |
A few Flagship Schemes out of a large spectrum of thrust areas of the Central Government specifically stood financially bolstered by the Union Budget 2020-21:
- PM Kissan Samman Nidhi
- PM Krishi Sinchayee Yojna
- PM Fasal Bima Yojna
- PM Jan Arogya Yojna
- Jal Jeevan Mission
- Swachh Bharat Mission
- National Ganga Plan
- Faster Adoption and Manufacturing of Electronic Vehicles (FAME)
- PM Mudra Yojna
- PM Smart Cities
- PM Ujjwala Yojna (existing beneficiaries 2 crores and additional 1 crore beneficiaries to be added)
- PM Atam Nirbhar Swasth Bharat Yojna
The tugboat constructed and launched in the shape of annual budget for financial year 2020-21, with six flag-pillars atop it, is designed for safe mooring and berthing of a large economic Ship of GDP carrying value load of Rs.134.09 Trillion(GDP), which is poised to grow multiple times in the years to come.
The aforesaid six pillars of budget 2021-22 are as under;
- Health and Well Being
- Physical and Financial Capital
- Inclusive development
- Reinvigorating Human capital
- Innovations and R&D
- Minimum government maximum governance
Deficit financing sources tapped in the budget 2021-22 are as under:
- Net market borrowing
- State provident funds
- External debt
- Security against small savings
- Other receipts (internal debts in public account)
- Draw down of cash balance
The annual budget also stands out as a narrative which celebrates the rhythmic assonance as well as deep dissonance amidst the multiple forces and counter-forces generated in the ‘never-locked’ mills of economic justice operating with inspirational light of social justice. Economic justice calls for productive and optimal use of resources in a progressive manner in developmental perspectives. Social justice focuses on the issues of resource distribution to ameliorate the lot of the have-nots, without optimal-sub optimal debates qua resource utilization and without even pausing for critical input-output analysis.
Holistic concept of justice subsumes both segments of economic justice as well as social justice. In fact both segments of justice are equally significant while the binary needs to remain balanced in terms of proportionality and prudence.
However, the ever-growing optics of social justice in the context of budgetary allocations, leads to the political narratives and counter narratives. The value and weight of budgetary allocations is also politically projected in public domains through tools of ‘headline-deficit allocations’ and ‘headline-surplus allocations’. The budgetary allocations, often projected in the political discourses as ‘epic of aberrations’, by assailing the usually nebulous contours of assumptions regarding direction and magnitude of economic values.
An interwoven text of the concepts of economic justice and social justice constitutes the foundation of a welfare State. Dwelling on the nuances of the issue, Hon’ble bench of Supreme Court in Lala Ram Vs. Union of India((2015) 5 SCC 813, para 9) aptly said;
“The fundamental feature of a Welfare state is social insurance. Anti-poverty programmes and a system of personal taxation are examples of certain aspects of a Welfare state. A Welfare state provides State sponsored aid for individuals from the cradle to the grave. However, a welfare state faces basic problems as regards what should be the desirable level of provision of such welfare services by the state, for the reason that equitable provision of resources to finance services over and above the contributions of direct beneficiaries would cause difficulties. A welfare state is one, which seeks to ensure maximum happiness of maximum number of people living within its territory. A welfare state must attempt to provide all facilities for decent living, particularly to the poor, the weak, the old and the disabled i.e. to all those, who admittedly belong to the weaker sections of society. Articles 38 and 39 of the Constitution of India provide that the State must strive to promote the welfare of the people of the state by protecting all their economic, social and political rights. These rights may cover, means of livelihood, health and the general well-being of all sections of people in society, specially those of the young, the old, the women and the relatively weaker sections of the society. These groups generally require special protection measures in almost every set up. The happiness of the people is the ultimate aim of a welfare state, and a welfare state would not qualify as one, unless it strives to achieve the same.”
There are multiple analytical tools employed to decode the strengths and weaknesses of a budget. The Provision Coverage ratio, Incremental Capital Output ratio are significant and are often cited in budget analysis.
The budget of FY2021-22 is based on theme of Atam Nirbhar Bharat and is critically focused on fiscal consolidation.
India at this juncture has become 5th largest economy of the World. It is poised to move upwards in the global competition. With regard to the social justice indicators, the progress of the nation in lifting 271 Million people out of the poverty line in a decade from 2006-2016 is a positive indicator, though calling for a more robust approach to add speed and strength to the poverty alleviation programmes.
FDI in India has grown from 190 Billion Dollar in 2009-14 to 284 Billion Dollar in 2014-19. The Central Government debt stands happily reduced from 52.2 of GDP to 48.7 of GDP in March 2019. Indian economy is also facing cross-cutting developments. Thus on one hand proliferation of technologies such as analytics, machine learning, robotics, bio-informatics and artificial intelligence etc. and on the other highest number of persons in the productive age group (from 5-65) stand out as noticeable features of the emerging economic scenario.
Through this robustly constructed tugboat in FY 2021-22, India aims to accomplish the following goals in near future:
- Seamless delivery of services through digital governance.
- Improvement of physical quality of life through national infrastructure pipeline.
- Risk mitigation through disaster resilience.
- Social security through pension and insurance penetrations in all segments.
Nirmala Sitharaman, second female Finance Minister of India (1st being Mrs. Indira Gandhi), in her paperless budget speech on 01.02.2021, lengthy speech of 110 Minutes, reminded the nation of the wisdom of the sages through the following two quotes, while spelling out the vision of the Government:-
“Faith is the bird that feels the light when the dawn is still dark”.
Rabindranath Tagore
“A king/ruler is the one who creates and acquires wealth, protects and distributes it for common good”.
Thiruvalluvar