Explaining the difference between the government finances reported in the Economic Survey and the Union Budget 2019-20

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Explaining the difference between the government finances reported in the Economic Survey and the Union Budget 2019-20

Suyash Tiwari - July 10, 2019 Comments

The Finance Minister, Ms. Nirmala Sitharaman, presented the Union Budget for the financial year 2019-20 in Parliament on July 5, 2019. In the 2019-20 budget, the government presented the estimates of its expenditure and receipts for the year 2019-20. The budget also gave an account of how much money the government raised or spent in 2017-18. In addition, the budget also presented the revised estimates made by the government for the year 2018-19 in comparison to the estimates it had given to Parliament in the previous year’s budget.

What are revised estimates?

Some of the estimates made by the government might change during the course of the year. For instance, once the year gets underway, some ministries may need more funds than what was actually allocated to them in the budget, or the receipts expected from certain sources might change. Such deviations from the budget estimates get reflected in the figures released by the government at later stages as part of the subsequent budgets. Once the year ends, the actual numbers are audited by the Comptroller and Auditor General of India (CAG), post which they are presented to Parliament with the upcoming budget, i.e. two years after the estimates are made.

For instance, estimates for the year 2018-19 were presented as part of the 2018-19 budget in February 2018. In the 2019-20 interim budget presented in February 2019 (10 months after the financial year 2018-19 got underway), the government revised these estimates based on the actual receipts and expenditure accounted so far during the year and incorporated estimates for the remaining two months.

The actual receipts and expenditure accounts of the central government are maintained by the Controller General of Accounts (CGA), Ministry of Finance on a monthly basis. In addition to the monthly accounts, the CGA also publishes the provisional unaudited figures for the financial year by the end of the month of May. Once these provisional figures are audited by the CAG, they are presented as actuals in next year’s budget. The CGA reported the figures for 2018-19 on May 31, 2019.[1] The Economic Survey 2018-19 presented on July 4, 2019 uses these figures.[2]

The budget presented on July 5 replicates the revised estimates reported as part of the interim budget (February 1, 2019). Thus, it did not take into account the updated figures for the year 2018-19 from the CGA.

Table 1 gives a comparison of the 2018-19 revised estimates presented by the central government in the budget with the provisional unaudited figures maintained by the CGA for the year 2018-19.[3]

Table 1: Budget at a Glance: Comparison of 2018-19 revised estimates with CGA figures (unaudited) (Rs crore)

	Actuals 2017-18	Budgeted 2018-19	Revised 2018-19	Provisional 2018-19	Difference (RE 2018-19 to Provisional 2018-19)
Revenue Expenditure	18,78,833	21,41,772	21,40,612	20,08,463	-1,32,149
Capital Expenditure	2,63,140	3,00,441	3,16,623	3,02,959	-13,664
Total Expenditure	21,41,973	24,42,213	24,57,235	23,11,422	-1,45,813
Revenue Receipts	14,35,233	17,25,738	17,29,682	15,63,170	-1,66,512
Capital Receipts	1,15,678	92,199	93,155	1,02,885	9,730
of which:
Recoveries of Loans	15,633	12,199	13,155	17,840	4,685
Other receipts (including disinvestments)	1,00,045	80,000	80,000	85,045	5,045
Total Receipts (without borrowings)	15,50,911	18,17,937	18,22,837	16,66,055	-1,56,782
Revenue Deficit	4,43,600	4,16,034	4,10,930	4,45,293	34,363
% of GDP	2.6	2.2	2.2	2.4
Fiscal Deficit	5,91,062	6,24,276	6,34,398	6,45,367	10,969
% of GDP	3.5	3.3	3.4	3.4
Primary Deficit	62,110	48,481	46,828	62,692	15,864
% of GDP	0.4	0.3	0.2	0.3

Sources: Budget at a Glance, Union Budget 2019-20; Controller General of Accounts, Ministry of Finance; PRS.

The 2018-19 provisional figures for revenue receipts is Rs 15,63,170 crore, which is Rs 1,66,512 crore less than the revised estimates. This is largely due to Rs 1,67,455 crore shortfall in centre’s net tax revenue between the revised estimates and the provisional estimates (Table 2).

Major taxes which see a shortfall between the gross tax revenue presented in the revised estimates vis-à-vis the provisional figures are income tax (Rs 67,346 crore) and GST (Rs 59,930 crore). Non-tax revenue and disinvestment receipts as per the provisional figures are higher than the revised estimates.

Table 2: Break up of central government receipts: Comparison of 2018-19 RE with CGA figures (unaudited) (Rs crore)

	Actuals 2017-18	Budgeted 2018-19	Revised 2018-19	Provisional 2018-19	Difference (RE 2018-19 to Provisional 2018-19)
Gross Tax Revenue	19,19,009	22,71,242	22,48,175	20,80,203	-1,67,972
of which:
Corporation Tax	5,71,202	6,21,000	6,71,000	6,63,572	-7,428
Taxes on Income	4,30,772	5,29,000	5,29,000	4,61,654	-67,346
Goods and Services Tax	4,42,562	7,43,900	6,43,900	5,83,970	-59,930
Customs	1,29,030	1,12,500	1,30,038	1,17,930	-12,108
Union Excise Duties	2,59,431	2,59,600	2,59,612	2,30,998	-28,614
A. Centre's Net Tax Revenue	12,42,488	14,80,649	14,84,406	13,16,951	-1,67,455
B. Non Tax Revenue	1,92,745	2,45,089	2,45,276	2,46,219	943
of which:
Interest Receipts	13,574	15,162	12,047	12,815	768
Dividend and Profits	91,361	1,07,312	1,19,264	1,13,424	-5,840
Other Non-Tax Revenue	87,810	1,22,615	1,13,965	1,19,980	6,015
C. Capital Receipts (without borrowings)	1,15,678	92,199	93,155	1,02,885	9,730
of which:
Disinvestment	1,00,045	80,000	80,000	85,045	5,045
Receipts (without borrowings) (A+B+C)	15,50,911	18,17,937	18,22,837	16,66,055	-1,56,782
Borrowings	5,91,062	6,24,276	6,34,398	6,45,367	10,969
Total Receipts (including borrowings)	21,41,973	24,42,213	24,57,235	23,11,422	-1,45,813

Note: Centre’s net tax revenue is gross tax revenue less share of states in central taxes. Figures for GST include receipts from the GST compensation cess. Note that GST was levied for a nine-month period during the year 2017-18, starting July 2017.

Sources: Receipts Budget, Union Budget 2019-20; Controller General of Accounts, Ministry of Finance; PRS.

While the provisional figures show a considerable decrease in receipts (Rs 1,56,782 crore) as compared to the revised estimates, fiscal deficit has not shown a comparable increase. Fiscal deficit is estimated to be Rs 10,969 crore higher than the revised estimates as per the provisional accounts.

On the expenditure side, the total expenditure as per the provisional figures show a decrease of Rs 1,45,813 crore as compared to the revised estimates. Certain Ministries and expenditure items have seen a decrease in expenditure as compared to the revised estimates made by the government. As per the provisional accounts, the expenditure of the Ministry of Agriculture and Farmers’ Welfare and the Ministry of Consumer Affairs, Food and Public Distribution are Rs 22,133 crore and Rs 70,712 crore lower than the revised estimates, respectively. The decrease in the Ministries’ expenditure as a percentage of the revised estimates are 29% and 39%, respectively. The food subsidy according to CGA was Rs 1,01,904 crore, which was Rs 69,394 crore lower than the revised estimates for the year 2018-19 given in the budget documents.

[1] “Accounts of the Union Government of India (Provisional/Unaudited) for the Financial Year 2018-19”, Press Information Bureau, Ministry of Finance, May 31, 2019.

[2] Fiscal Developments, Economic Survey 2018-19, https://www.indiabudget.gov.in/economicsurvey/doc/vol2chapter/echap02_vol2.pdf.

[3] Controller General of Accounts, Ministry of Finance, March 2018-19, http://www.cga.nic.in/MonthlyReport/Published/3/2018-2019.aspx.

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Examining urban local governance in India through the case of Bengaluru

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Prachi Kaur and Shruti Gupta - December 24, 2020 Comments

Recently, the Karnataka legislature passed the Bruhat Bengaluru Mahanagara Palike (BBMP) Bill, 2020. BBMP is the municipal corporation of the Greater Bengaluru metropolitan area. The BBMP Act, 2020 seeks to improve decentralisation, ensure public participation, and address certain administrative and structural concerns in Bengaluru. In this blog, we discuss some common issues in urban local governance in India, in the context of Bengaluru’s municipal administration.

The Constitution (74th Amendment) Act, 1992 provided for the establishment of urban local bodies (ULBs) (including municipal corporations) as institutions of local self-government. It also empowered state governments to devolve certain functions, authority, and power to collect revenue to these bodies, and made periodic elections for them compulsory.

Urban governance is part of the state list under the Constitution. Thus, the administrative framework and regulation of ULBs varies across states. However, experts have highlighted that ULBs across India face similar challenges. For instance, ULBs across the country lack autonomy in city management and several city-level functions are managed by parastatals (managed by and accountable to the state). Several taxation powers have also not been devolved to these bodies, leading to stressed municipal finances. These challenges have led to poor service delivery in cities and also created administrative and governance challenges at the municipal level.

BBMP was established under the Karnataka Municipal Corporation Act, 1976 (KMC Act). The BBMP Act, 2020 replaces provisions of the KMC Act, 1976 in its application to Bengaluru. It adds a new level of zonal committees to the existing three-tier municipal structure in the city, and also gives the Corporation some more taxation powers. Certain common issues in urban local governance in India, with provisions related to them in the BBMP Act, 2020 are given below.

Functional overlap with parastatals for key functions

The Constitution (74^th Amendment) Act, 1992 empowered states to devolve the responsibility of 18 functions including urban planning, regulation of land use, water supply, and slum upgradation to ULBs. However, in most Indian cities including Bengaluru, a majority of these functions are carried out by parastatals. For example, in Bengaluru, the Bengaluru Development Authority is responsible for land regulation and the Karnataka Slum Clearance Board is responsible for slum rehabilitation.

The BBMP Act, 2020 provides the Corporation with the power and responsibility to prepare and implement schemes for the 18 functions provided for in the Constitution (74^th Amendment) Act, 1992. However, it does not provide clarity if new bodies at the municipal level will be created, or the existing parastatals will continue to perform these functions and if so, whether their accountability will shift from the state to the municipal corporation.

This could create a two-fold challenge in administration. First, if there are multiple agencies performing similar functions, it could lead to a functional overlap, ambiguity, and wastage of resources. Second, and more importantly, the presence of parastatals that are managed by and accountable to the state government leads to an erosion of the ULB’s autonomy. Several experts have highlighted that this lack of autonomy faced by municipal corporations in most Indian cities leads to a challenge in governance, effective service delivery, and development of urban areas.

An Expert Committee on Urban Infrastructure (2011) had recommended that activity mapping should be done for the 18 functions. Under this, functions in the exclusive domain of municipalities and those which need to be shared with the state and the central government must be specified. Experts have also recommended that the municipality should be responsible for providing civic amenities in its jurisdiction and if a parastatal exercises a civic function, it should be accountable to the municipality.

Stressed municipal finances

Indian ULBs are amongst the weakest in the world in terms of fiscal autonomy and have limited effective devolution of revenue. They also have limited capacity to raise resources through their own sources of revenue such as property tax. Municipal revenue in India accounts for only one percent of the GDP (2017-18). This leads to a dependence on transfers by the state and central government.

ULBs in states like Uttar Pradesh, Uttarakhand, Bihar, Jharkhand, Rajasthan, and Haryana are in poor financial condition. This has been attributed to limited powers to raise revenue and levy taxes, and problems in the management of existing resources. For instance, the finances of Bihar’s ULBs were assessed to be poor because of: (i) delays in release of grants, (ii) inadequate devolution of funds, and (iii) delays in revision of tax rates and assessments of landholdings.

In comparison, Karnataka ranks high among Indian states in key indicators for fiscal capacity like collection of property taxes, grants from Central Finance Commissions, and state government transfers. The BBMP Act, 2020 further increases the taxation powers of the Corporation, by allowing it to impose taxes on professions and entertainment.

Experts have recommended that the central government and the respective state government should provide additional funds and facilitate additional funding mechanisms for ULBs to strengthen their finances. The revenue of ULBs can be augmented through measures including assignment of greater powers of taxation to the ULBs by the state government, reforms in land and property-based taxes (such as the use of technology to cover more properties), and issuing of municipal bonds (debt instruments issued by ULBs to finance development projects).

Powers of elected municipal officials

The executive power with state-appointed municipal Commissioners and elected municipal officers differs across states. States like Tamil Nadu and Gujarat, and cities like Chennai and Hyderabad vest the executive power in the Commissioner. In contrast, the executive power of the Corporation is exercised by a Mayor-in council (consisting of the Mayor and up to 10 elected members of the Corporation) in Kolkata and Madhya Pradesh. This is unlike large metropolitan cities in other countries like New York and London, where elected Mayors are designated as executive heads. Experts have noted that charging Commissioners with executive power diluted the role of the Mayor and violated the spirit of self-governance.

Under the BBMP Act, 2020, both the elected Mayor and the state-appointed Chief Commissioner exercise several executive functions. The Mayor is responsible for approving contracts and preparing the budget estimate for the Corporation. He is also required to discharge all functions assigned to him by the Corporation. On the other hand, executive functions of the Chief Commissioner include: (i) selling or leasing properties owned by the Corporation, and (ii) regulating and issuing instructions regarding public streets.

The Expert Committee on Urban Infrastructure (2011) has recommended that the Commissioner should act as a city manager and should be recruited through a transparent search-cum-selection process led by the Mayor. A Model Municipal law, released by the Urban Development Ministry in 2003, provided that the executive power should be exercised by an Empowered Standing Committee consisting of the Mayor, Deputy Mayor, and seven elected councillors.

Management of staff and human resources

Experts have noted that municipal administration in India suffers from staffing issues which leads to a failure in delivering basic urban services. These include overstaffing of untrained manpower, shortage of qualified technical staff and managerial supervisors, and unwillingness to innovate in methods for service delivery.

The BBMP Act, 2020 provides that the Corporation may make bye-laws for the due performance of duties by its employees. However, it does not mention other aspects of human resource management such as recruitment and promotion. A CAG report (2020) looking at the implementation of the Constitution (74th Amendment) Act, 1992 in Karnataka has observed that the power to assess municipal staff requirements, recruiting such staff, and determining their pay, transfer and promotion vests with the state government. This is in contrast with the recommendations of several experts who have suggested that municipalities should appoint their personnel to ensure accountability, adequate recruitment, and proper management of staff.

Other states including Kerala, Maharashtra and Tamil Nadu also allow the state governments to regulate recruitment and staffing for ULBs. In cities like Mumbai, and Coimbatore, and some states like Gujarat and Madhya Pradesh, while the recruitment process is conducted by the respective municipal corporations, the final sanction for hiring staff lies with the state government.

Anti-Conversion Legislation: Comparison of the UP Ordinance with other state laws

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Anoop Ramakrishnan - December 17, 2020 Comments

On November 27, 2020, the Uttar Pradesh (UP) Prohibition of Unlawful Conversion of Religion Ordinance, 2020 was promulgated by the state government. The Ordinance seeks to regulate religious conversions and prohibits certain types of religious conversions (including through marriages). Few other states, including Haryana and Karnataka are also planning to introduce a similar law. This blog post looks at existing anti-conversion laws in the country and compares the latest UP Ordinance with these laws.

Anti-conversion laws in India

The Constitution guarantees the freedom to profess, propagate, and practise religion, and allows all religious sections to manage their own affairs in matters of religion; subject to public order, morality, and health. To date, there have been no central legislations restricting or regulating religious conversions. Further, in 2015, the Union Law Ministry stated that Parliament does not have the legislative competence to pass an anti-conversion legislation. However, it is to be noted that, since 1954, on multiple occasions, Private Member Bills have been introduced in (but never approved by) the Parliament, to regulate religious conversions.

Over the years, several states have enacted ‘Freedom of Religion’ legislation to restrict religious conversions carried out by force, fraud, or inducements. These are: (i) Odisha (1967), (ii) Madhya Pradesh (1968), (iii) Arunachal Pradesh (1978), (iv) Chhattisgarh (2000 and 2006), (v) Gujarat (2003), (vi) Himachal Pradesh (2006 and 2019), (vii) Jharkhand (2017), and (viii) Uttarakhand (2018). Additionally, the Himachal Pradesh (2019) and Uttarakhand legislations also declare a marriage to be void if it was done for the sole purpose of unlawful conversion, or vice-versa. Further, the states of Tamil Nadu (2002) and Rajasthan (2006 and 2008) had also passed similar legislation. However, the Tamil Nadu legislation was repealed in 2006 (after protests by Christian minorities), while in case of Rajasthan, the bills did not receive the Governor’s and President’s assent respectively. Please see Table 2 for a comparison of existing anti-conversion laws across the country.

In November 2019, citing rising incidents of forced/fraudulent religious conversions, the Uttar Pradesh Law Commission recommended enacting a new law to regulate religious conversions. This led the state government to promulgate the recent Ordinance. We discuss the key features of the ordinance below.

What does the UP Ordinance do?

The Ordinance defines conversion as renouncing one’s existing religion and adopting another religion. It prescribes a procedure for individuals seeking to undergo conversions (in the state of Uttar Pradesh) and declares all other forms of conversion (that violate the prescribed procedures) illegal.

Procedure for conversion: The Ordinance requires individuals (seeking to convert) and religious convertors (who perform such conversions) to submit an advance declaration of the proposed religious conversion to the District Magistrate (DM). The declarations have to be given with a notice of: (i) 60 days by the individual, and (ii) one month by the convertor. On receiving both the declarations, the DM is required to conduct a police enquiry into the intention, purpose, and cause of the proposed conversion.

Once the conversion has taken place, within 60 days from the date of conversion, the converted person must submit a declaration (with various personal details) to the DM. The DM will then publicly exhibit a copy of the declaration (till the conversion is confirmed) and record any objections to the conversion. The converted person must then appear before the DM to establish his/her identity, within 21 days of sending the declaration, and confirm the contents of the declaration. Violating any of these procedures will render the conversion illegal and void, and will attract punishment of: (i) imprisonment between six months and three years, and a fine of at least Rs 10,000 (for individuals seeking to convert), and (ii) imprisonment between one and five years, and a fine of at least Rs 25,000 (for convertors).

Prohibition on conversions: The Ordinance prohibits conversion of religion through means, such as: (i) force, misrepresentation, undue influence, and allurement, or (ii) fraud, or (iii) marriage. It also prohibits a person from abetting, convincing, and conspiring to such conversions. The Ordinance assigns the burden of proof of the lawfulness of religious conversion to the persons causing or facilitating such conversions. However, a person reconverting to his/her immediate previous religion is allowed.

Marriages involving religious conversion: Under the Ordinance, a marriage is liable to be declared void if it was done for the sole purpose of unlawful conversion, or vice-versa. However, a marriage involving religious conversion is permitted if the conversion is undergone as per the procedure laid down under the Ordinance.

Punishment for unlawful conversions: The Ordinance provides for punishment for causing or facilitating unlawful religious conversion, as specified in Table 1. Further, the accused will be liable to pay compensation of up to five lakh rupees to the victim of conversion. Additionally, repeat offences will attract double the punishment specified for the respective offence. All offences under the Ordinance are cognisable and non-bailable.

Table 1: Punishments prescribed under the Ordinance for offences by individuals for causing/facilitating the conversion

Type of offence	Term of imprisonment	Fine amount
Mass conversion (conversion of two or more persons)	3-10 years	Rs 50,000 or more
Conversion of a minor, woman, or person belonging to SC or ST	2-10 years	Rs 25,000 or more
Any other conversion	1-5 years	Rs 15,000 or more

If any of the above three offences are committed by an organisation, the registration of the organisation is liable to be cancelled and grants or financial aid from the state government is liable to be discontinued.

Note: For Odisha, Jharkhand, and Uttarakhand, some of the penalties have been specified in the Rules published under their respective Acts. For the rest of the states, the penalties have been specified in the respective Acts.

Explaining the difference between the government finances reported in the Economic Survey and the Union Budget 2019-20

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