Why Jaitley Didn’t Tell Us About DeMo Figures In His Budget Speech
Finance Minister Arun Jaitley, in his budget speech, did not make any mention of the fiscal gains from demonetisation. While this has raised eyebrows, there are concrete reasons behind his decision to not make note ban dividend a part of his budget speech.
First, the current financial year for the Reserve Bank of India will end in June. Also, the bank, given the painstaking task of counting the notes and eliminating counterfeits that it is performing, will take more time to come up with the final estimate. The final numbers, as others have suggested, are expected around June 2017. Without concrete numbers, it can’t be made a part of the budget.
Second, the tax inflows from the Income Disclosure Scheme (IDS) announced post-demonetisation has not been made a part of the budget because the window for the scheme will remain open until 31 March. However, tax collected through the first IDS scheme could have been made a part of the budget.
When asked why the government did not clear air on demonetisation, economic affairs secretary Shaktikanta Das told Livemint that the government is waiting for the RBI to complete the process.
The window technically is now open till June. RBI is engaged in counting notes. Let that be complete. We will get a clearer picture. The bigger thing to keep in mind is that the process of remonetisation is almost complete. I don’t know how much time they will take.
On tax collection through Garib Kalyan Yojana, he said:
Whatever we get as a one-time dividend from RBI, whatever higher tax collection we get from Garib Kalyan Yojana, will come as a bonus. It is difficult to make an assessment about how many people will take the benefit of Garib Kalyan Yojana. We will know only on 31 March. In all such schemes, the response comes in the last 10 days. We have assumed dividend from RBI this year almost at last year’s level of around Rs 66,000 crore. Let’s see.
P Vaidyanathan Iyer, writing in the Indian Express, argues:
Jaitley hasn’t budgeted for two substantial revenue components in his Receipts document — the tax inflows from the Income Disclosure Scheme (IDS) announced post-demonetisation and a windfall equal to the quantum of 500 and 1,000 rupee notes not returning to the formal banking system. Put together, on a conservative basis, these could yield the exchequer at least Rs 1,50,000 crore during the course of 2017-18.
He writes that this constitutes a “big cushion” the finance minister has “secretly kept outside the budget. While the IDS receipts will accrue to direct taxes, the windfall due to demonetisation will flow into the non-tax revenue kitty of the government. In addition to this, there will be deposits into the Pradhan Mantri Garib Kalyan Yojana, an interest-free source of debt available to the government for a four-year period. These sums will be available to the government for any additional expenditure during the course of 2017-18, and also give Jaitley the confidence to meet the fiscal deficit target of 3.2 per cent of the GDP for the next year”.