1. Total Revenue Receipts 2019-20 = 2248 KCr (12.85% increase over last yr numbers)
2. Major contributors are – Taxes (1652 KCr, 11.2%increase), Railways (214 KCr, 10.3% increase) and PSU Profits & Dividend (163KCr, 37% increase).
Clearly, PSU asset stripping shall be at work.
My estimate:
Taxes are going to a challenge. Major contributor being Corporate Tax (expected growth 14%), Income Tax (7%growth), GST (5% growth) and Excise (16% growth). Slowdown has been factored in the maths, except for Corporate Taxes. Our studies on EPS growth in Q1 indicates suggest that even in the best case scenario, this would grow in 5% to 7% range. Overall, in tax head, we may have 50K shortfall.
Considering last year when serious PSU asset stripping was done, 119 KCr was generated. Energy PSUs might not have same profitability this year Hence, we may fall short by 30 to 40 KCr. Also, railway revneues appear overstated.
In summary, revenue receipts may fall short by 80 to 100 KCr.
2. Capital Receipts account for borrowings, loan repayments by state govt and most notably, PSU disinvestment which has been pegged at 105 KCr.
On Expenditure side – Operational expenses are planned to grow at 13.7% to 2733 KCr, one-fouth of which is debt service (671 KCr). Other big heads are railways (229 KCr), food warehousing (191KCr). There is a 70% increase in Crop Husbandry (Farming) budget – from 60K to 113K. Perhaps farmers income scheme sits here.
Mismatch between FM’s words and allocations are visible in the area of Education (total 44K Cr, up 10%), Healthcare (total 28KCr) and S&T (29KCr).
On capital expenditure side, Defense gets 103 KCr (up 10%), Railways 66K Cr (up 27%), Roads 68 KCr (up 6%) – is that all for Bharatmala program? Or we are going to see bonds based borrowing or PPP.
On loan repayments, interesting entry of 50 KCr is under warehousing – retirral of FCI borrowings. Well that actual liability on that account is significantly higher. Also, considering the increase in opex on this account, the liability will balloon further.
The fiscal deficit story
It has been pegged at 705 KCr at 3.3% of GDP. This implies, FY20 GDP at 213 LCr. Considering, nominal GDP for 18-19 was at 190 LCr, we are looking at 12.4% nominal growth. Match this with real GDP growth estimate of 7% (in the Economic Survey), are we staring at core inflation of 5.4%? That could very well be, if we bring Re.1 cess proposed on fuel.
Also, does FD really end up at 705KCr? Expect revenue shortfall of 75KCr. Do bridge this with RBI bonanza or we print more money that may further add to inflationary pressures or hide it behind the balance sheets of FCI and Railways. We will get to know in 12 months.