Highlighting the fact that the Government dealt with tough economic realities while formulating the Union Budget, Minister of State for Finance Jayant Sinha on Wednesday said that people need to understand the bitter economic truth that Government has a very little room for tax concessions. "Basically as a Government, we are bankrupt… You should know the reason why we are in the situation apart from the irresponsible spending of the previous regime. The tax-to-GDP ratio for the central government is 10 per cent and state plus centre is about 15-16 per cent," said Sinha during a post budget interaction organised by industry body FICCI.
The OECD average is 35 per cent. Brazil, Indonesia, Kenya, Nepal, each of these countries have a tax-to-GDP ratio higher than India and then we as a society are thinking of tax concessions, he added. "Our tax-to-GDP ratio is simply not acceptable. If we want to run a modern 21st century state, and if we want deliver to our people the public goods and services that they demand and which is their right, we cannot deliver at our tax-to-GDP ratio at which we are right now," Sinha said.
The actual expenditure of the FY14-15 is Rs 16.8 lakh crore where as the actual revenue collection is about Rs 11.7 lakh crore, which is Rs 1 lakh crore less than what was estimated. The Government printed notes worth Rs 5.1 lakh crores, which is 44 per cent of the revenue collection. So, given these numbers it is very difficult for Government to allow more tax concessions and exemptions.
Shedding light on the challenges that were faced by the NDA Government while preparing the budget, the Minister said, "We inherited a fiscal deficit of 4.7 per cent from the previous Government. Frankly, it was not 4.7 per cent, it was actually higher. Variety of things were done to make the numbers look good. So, this fiscal year we had to demonstrate fiscal management of bringing deficit down from more than 5 per cent probably to 4.1 per cent of the GDP."