India's budget 2016-17

The Indian budget 2016-17 announced by Finance Minister Arun Jaitley, on 29th February, has been criticised mainly on three counts. First, that the projected fiscal deficit may not be met given that the earmarked privatisation proceeds for the outgoing fiscal year were unmet by 50 percent; thus the ambitious target of 1.2 lakh crore rupees for divestment and sale of telecom spectrum may not be achieved. In addition, the projection of low international price of oil for next year inaccurate - a projection that accounts for budgeted subsidies for petroleum products of roughly the same amount as what was achieved in the revised estimates of 2015-16 or in total terms 30,000 crore rupees. The actual budgeted amount last year under this head was double the revised amount. Secondly, according to a domestic Indian rating agency, Crisil, "the actual allocation of 25,000 crore rupees for their (banks') recapitalisation is clearly inadequate and will hurt banks' ability to fund growth." And thirdly, the reduction in infrastructure outlay may compromise projected growth.
And in passing, it is interesting to note the tax amnesty scheme on offer by the Indian government in the budget 2016-17: the scheme grants a domestic taxpayer immunity from prosecution if he/she declares undisclosed income or income represented in the form of an asset by paying tax at 30 percent, surcharge at 7.5 percent and penalty at 7.5 percent which is a total of 45 percent of undisclosed income. To restate Pakistan's flawed tax amnesty scheme, the date for which has already been extended, would simply fuel the heated debate of its advisability given that it is widely regarded as unfair by the existing taxpayers.
It has long been a source of concern for Pakistani governments that the Punjab's agriculture's yield is around 78 maunds per acre while in Pakistan's Punjab it is 35 maunds per acre. The reasons include fiscal and monetary incentives that have been given by successive Indian governments in marked contrast to our governments (past and present). The gap in incentives is expected to widen between the two Punjabs, given the several 2016-17 budgeted measures to promote the farm sector by the Indian government which include 28.5 lakh hectares to be brought under irrigation with 89 irrigation projects to be fast tracked, a dedicated long-term irrigation fund with an initial amount of 20,000 crore rupees, 10 lakh compost pits for production of organic manure, soil health card scheme to cover 14 crore farm holdings by 2017, 2,000 model retail outlets of fertiliser companies with soil and seed testing facilities during the next three years and unified agriculture marketing e-platform for wholesale markets and to connect 65,000 eligible habitations by 2019 to reduce the burden of loan repayment on farmers. Prime Minister Nawaz Sharif announced a farm package recently, prior to the local bodies elections in Sindh and Punjab, which has not been implemented - neither the crop insurance scheme nor the 20 billion rupee subsidy nor the promised cash support to rice and cotton crops. The reason for failure to implement the PM's Kissan Package is the fact that we are on an International Monetary Fund programme and have limited expenditure options, so maintain the Ministry of Finance staff on condition of anonymity.
The Indian budget 2016-17 allocates 10 percent to defence, one percentage point less than in 2014-15; however, given the size of the Indian economy as well as the recorded 7.6 percent growth in 2015-16 (in contrast to ours of less than 4 percent though the government is widely expected to overstate it by the end of our current fiscal year), Pakistan would have to increase allocation to defence by a higher percentage just so as to be able to maintain parity. This of course is simply not doable given the state of the economy and a slow growth rate due to the government's continued focus on deficit reduction rather than on fuelling growth. In addition, Pakistan army is currently engaged in the Operation Zarb-e-Azb requiring much greater resources. Thus in 2014-15 budget the defence forces were budgeted 781 billion rupees, which compares unfavourably with India's 40 billion dollars in 2016-17 but which was a whopping 19 percent of our total expenditure (current and development) as opposed to India's 10 percent.
One thing in common between the Indian and Pakistani incumbent government is their focus on road building; however, the Indian government's total outlay on infrastructure in 2016-17 is 221,246 crore rupees. But in Pakistan's case the road is being built with borrowed funds from the Chinese companies which would imply a much higher cost to the general public.
And finally, the Indian government correctly calculates the fiscal deficit as the difference between revenue plus non-debt capital receipts and total expenditure. Unfortunately in Pakistan, the fiscal deficit is defined as revenue plus debt bearing capital receipts and total expenditure. Be that as it may, the Indian government budgeted a fiscal deficit of 3.5 percent, down 0.4 percentage points from the revised estimates of 2014-15. Pakistan is still attempting to achieve the deficit of 4.3 percent this year but given the relevant data that may not be achievable even with accounting jugglery.