Union Budget 2015: A conservative plan
Finance Minister Arun Jaitley’s budget is unlike last year’s plan where the revenue and expense estimates were both a bit iffy.
The fears on last years plans have now been confirmed, revealing a torment, which is avoidable even in a household budget! For example, last year’s budget aimed for a 20% hike in tax revenue but managed only 10%.
This year's plan seems to be relatively sober and attempts to get the basics rights. Mr. Jaitley has attempted to be prudent on expenses without skimping on the much-needed capital expenditure.
The budget seems to have no obvious science fiction on revenues estimates and the tax department conceivably has achievable targets. This is important and it sets an honest tone for actions ahead, over his remaining four years in office.
This year the FM is still targeting a 16% rise in tax revenues against a 10% increase achieved in previous year. This would require many things to come together. Importantly, the targets for various individual taxes largely appear to be credible. Service tax, customs and corporate taxes are all a case of point.
Some might argue that the FM is not being conservative at least on his revenue estimates. While the target for 2015-16 on excise and service tax collection could be realistic given the growth expectations and increase in taxes, at 24%, these might very well prove to be stiff considering the reality of 2014-15, where the revised estimates reveal that the collections grew by just about 9%.
The table below shows the targeted increase in tax revenues in 2015-16 along with the increase targeted in the previous year as against the actual increase.
2015-16 Target Increase (%)
Actual Increase (%)
Gross Tax Revenue
Taxes on Income
Union Excise Duties
Taxes on Union Territories
There is some slack in the case of non-tax revenue, where the FM has targeted just a 2% upward nudge. Less expectations on dividends from public sector? For 2014-15, a 9.5% increase was achieved against a target of 7%.
The disinvestment target of Rs 69,500 crore for 2015-16 is near to the one set in previous year even though only 50% of the 2014-15 target was achieved. The FM, now second year in office, needs to deliver on this count. In-fact, one would hope that this target is well exceeded.
The story on the expense side seems to be one of pragmatism and hope with an ambitious plan to increase capital expenditure by 16.3% on non-plan side and 33.9% on the plan side. This would help economic growth. Last year, though there was a plan to increase capital expense by about 20% on both plan and non-plan side, the same was not achieved. A result perhaps of poor budgeting and execution.
The table below show how the FM plans to increase expenditure and how this compares with the plan and actual of the last year.
2015-16 Target Increase (%)
2014-15 Targeted Increase (%)
2014-15 Actual Increase (%)
Total Revenue Non-Plan Expenditure
Grants to State and U.T. Governments
Capital Non Plan Expenditure
Other Non-Plan Capital Outlay
Total Revenue Plan Expenditure
Total Capital Plan Expenditure
With plausible revenue targets and prudent expenditure plan, there is an elevated probability that the plan would hold up. This should give some confidence to every one. Next February could then provide greater leeway to initiate measures to spur demand.
This write-up is not about what the FM did not do and that could really be a long list! It must however be said that for the average tax payer, this budget offers no meaningful tax relief, not even to keep up with inflation. In-fact, there is an unwelcome hike in service tax.
Yes, there is some well intended push towards encouraging spending on pension and insurance but no unconditional relief on taxes.
Perhaps, the FM could have at-least hiked the basic tax exemption limit by 10% i.e. Rs 25,000. Assuming 40 million taxpayers this would have meant forgoing a tax of Rs 2500 per tax payer or about Rs 10,000 crore in aggregate which is 0.6% of total budget expenditure.
Clearly, the wait for Acche Din continues. And there is hope that the road taken leads there.