Thread by @anuragsingh_as

Long thread on Budget FY-2020: How difficult is finance minister’s job in #India. If you’re amongst those who think the budget doesn’t do much for people, you need to understand this in detail. Why do we struggle to solve national problems? #Budget2020 #NirmalaSitharaman

Let me simplify things for the readers as to how the budget looks like & what the numbers mean. Below is the graphic that I have created for the revenue & expense heads for govt of India.Left side is govt INCOME & right side is how it SPENDS for the year. Size Rs 27.8 lac crores

Income of govt:
1) Taxes & non-tax revenue is 61% & 10% respectively. Additionally, another 4% comes by selling govt shares in PSUs. All this adds to 75%.
2) Borrowings forms the balance 25% of Income. This is our govt borrowing money to spend which of-course carries interest.

Expenses of govt:
1) Revenue expenditure:
88% of govt spending is revenue expenditure. What is it ? Anything that is spent but doesn't create any asset. So all salaries,subsidies & pensions to govt employees forms majority of this expense. Revenue expenses are largely wasteful.

This is drain on resources. No roads built, no infra created……nothing. Just paid off to people. This can’t create any development as you can see. And it is paid every year. You just can’t stop this expense. Also 24% of it is interest payments. So govt borrows to pays interest !

2) Capital expenditure:
Just 12% of the spending goes to create assets. So building new hospitals, schools, infrastructure, modernizing govt machinery, defense spends on arms, computers for schools, anything that you can think of that results in creation of a physical asset.

But it is just 12% !! Believe it or not, NAREGA is partly classified as capital expense. 4% goes to defense which is in-sufficient. 3% gone for PSU bank capitalization. So, you know what it is now. Hardly any infra created in a country which is starved of assets. Now you know why

So what are the challenges for our FM ?

a) Too high revenue spending:
Biggest issue is that Govt is spending substantially more than it earns just on salaries, subsidies & pensions. Simply speaking, govt earns 71% tax/other revenue but spends 88% on recurring expenses.

So we have a system where govt doesn’t earn enough revenue to pay even its salaries, subsidies & interest payments. Tell me how sustainable is this? Still wondering why the govt is unable to hire more jobs or selling PSUs or banks ? Because we don’t earn enough to pay these jobs.

b) Too low capital spending for nation development:
Just 12% for a developing nation ? Shouldn’t this be much higher ? In practice however, anything that is leftover after paying revenue expenses forms the capital expenditure pool.

Since the govt is bloating under higher salary demands, pensions, sick PSUs, it is unlikely that this share of 12% will increase. In-fact it has been steadily falling from 24% in 2004 to 12% now. Looks like the govt will bust even this very soon. Thanks to the left socialism.

c) More alarming is the social spending pattern:
Look at the below graphic for major schemes of govt. 12% on subsidies,2% on NREGA doles & 3% is PM Kissan doles to farmers. It is a commitment forever. It is just like govt salaries. 17% of budget is pure doles to farmers & labors

Where does this leave development ? Afterall, interest payments, salaries & subsidies will not develop the nation.
Well, there is budget allocated for that. Here are the numbers. See the other number on the below table : R&D - 0.4% ,Highways- 1.3%,Health - 1.2%,Education - 1.4%

Concerned ? We should be.
Looks like govt is just becoming a means to transfer money from one set who earns to others who will live off the doles in exchange of their votes. They have numbers after all. Enough problems some would say. Want to hear about SOLUTIONS ! Let me think:

Solution -1 : Raise govt income:
This can be done by raising taxes or better collection compliance. Looks too simple. Can we as a nation do it ? Let's see. GST is already much hated & demands are to reduce it. I see it only going up, despite being un-popular.

Salaried guys, do you want to pay more taxes? Na….leave us pls. Self employed folks ? Any takes for more tax compliance ? Well…… we pay but there is hardly any income with us (on paper at-least) Where to pay taxes from? Leave us alone if you want our votes.

Solution -2: Reduce wasteful revenue expenditure so that more money can go for creating assets. Very simple again. Can we as a nation do it ? Let’s see. Reduce interest payments ? Not possible. Our govt splurged in the past on borrowed money. Interest has to be paid. 24% gone.

Subsidies form 12%. Stop kerosene, ration, agriculture & gas subsidy ? And lose next election……this is a democracy pls. Subsidies will happen. Okay. What next…..may be defense at 12% is high ? Brilliant !! Do you know, all this is just salaries for the military.

We are not buying new planes. Do you suggest we reduce size of our military ?Okay….hmm. What about other govt departments. Let’s go lean on the govt size & have lesser employees ? You mean fire govt employees ? Sorry, what a blunder. #RavishKumar will start naukri series again

Well…… I’m out of options. However I’m sure, you can think of a few solutions. But please, don’t forget to plan the money for it. Just proposing ideas (hire more govt jobs,build more roads, schools & hospitals) without budgeting is political propaganda & wishful thinking.

For any spending, you need to generate income first. With measly 2 % spending on Health + Education & 0.4% on Research, talk of India being an economic superpower ? We need to work a little harder than this ! Its a long road ahead. #indianeconomy #budget