E-Paper
Deficit will become easier to manage
In a major reform process, the government on Wednesday approved the merger of railway budget with the general budget, the advancement of the date of budget presentation
In a major reform process, the government on Wednesday approved the merger of railway budget with the general budget, the advancement of the date of budget presentation from the last day of February to the first day of February and the merger of the plan and the non-plan classification in the budget and related accounts.
The most important fact is that after the merger, the railways would not have to pay dividend to the central government and its capital at charge would stand wiped off. The railways have been paying up to ₹10,000 crore as dividend to the government. This move will also push railways to better capital budgeting enhancing public accountability.
The removal of distinction between plan and non-plan expenditure is also a welcome step. There will be more transparency in government accounting as expenditures will get classified as revenue and capital largely mirroring the commercial principles of current and capital expenditure. In the backdrop of the abolition of the Planning Commission and setting up of the NITI Aayog, the classification of expenditure as plan and non-plan had lost its relevance. The extension of the Direct Benefit Transfer (DBT) scheme also required removal of this classification as per Expenditure Management Commission. The government has also approved advancing presentation of the Union Budget by a month.
This early presentation of Budget would mean that the entire exercise is over by March 31 and expenditure as well as tax proposals come into effect right from the beginning of new fiscal, thereby ensuring better implementation. However, on the flip side this will lead to less expenditure by various ministries though the fiscal deficit management will get a positive boost. The estimate is that the move would have positive impact of around ₹1-1.5 lakh crore (1% of GDP) on gross tax revenue.
With these steps taken it is now the right time for the central and state governments to take concrete steps to shift to accrual accounting.
The author is chief economic advisor, SBI. The views are personal.
