It is a truth universally acknowledged, to paraphrase Jane Austen, that a Treasury that possesses a great fortune must need a Chancellor of the Exchequer who spends. Wisely, indeed.

The BJP may not have been so lucky in the recent election campaign, but the devil’s luck has been a blessing for the country’s finances through higher dividends from the RBI and a healthy income stream. There will be no no-claim bonus, like in health insurance, if you don’t spend the wealth, and so the exchequer is naturally under pressure to do something for everyone.

Such a spending spree will not only restore the government’s lost political ground but, more importantly, address the underlying problems of household stress, youth unemployment and rural poverty that the opposition says have been waiting to be addressed for a long time.

As they say, money makes many things, and so we are at The New Indian Express we are back at the annual exercise of investigating whether there are better, alternative ways to allocate our resources.

Anil K Sood, founder of the Institute for Advanced Studies in Complex Choices, an economic research institute, has once again worked his socks off to present what can be called a basic budget for India. Sood’s figures include an exhaustive breakdown of income and expenditure, broken down into departmental income and capital expenditure allocations, besides the revenue budget comprising tax revenue, non-tax revenue and debt and capital receipts.

We have yet to recover from the output losses caused by the pandemic and will need another decade to recover. While economic conditions in cities are far from ideal for accelerating growth, he estimated nominal GDP growth at 11% for FY25, compared to the government’s estimate of 11.5%. Given the low GDP deflator, Sood expects real GDP to come in at 7% or thereabouts for FY25, while we need growth faster than 8% to rebuild the economy.

Overall, the FY25 expenditure budget has been pegged marginally higher at Rs 48.06 lakh crore than the interim budget’s Rs 47.65 lakh crore. The proposed expenditure amounts to an 8.2% increase over the FY24 advance estimates of Rs 44.4 lakh crore. As a percentage of GDP, the shadow budget’s expenditure for FY25 is pegged at 14.8%, compared to the interim budget’s 14.54%.

However, unlike in the past, when capital expenditure (capex) formed the crown of all forex allocations, the shadow budget changes significantly, with expenditure pegged lower at Rs 10.86 lakh crore from the interim budget’s Rs 11.1 lakh crore. Of course, revenue expenditure is higher at Rs 37.19 lakh crore, while the government has pegged it at Rs 36.54 lakh crore.

Gross tax revenues are likely to grow 12.6% to Rs 39 lakh crore, higher than the interim budget estimates of Rs 38.30 lakh crore. On the face of it, the difference between the two estimates may not seem that stark, but what stands out in Sood’s projection is the revenue mix. While the interim budget pegged income tax revenues at Rs 11.56 lakh crore, higher than corporate revenues of Rs 10.42 lakh crore, Sood assumed the contribution from both would be similar, around Rs 11.36 lakh crore each.

Within indirect taxes, GST revenue is estimated at Rs 12.66 lakh crore for FY25, or an increase of 12.13% over the FY24 advance estimates of Rs 11.29 lakh crore. Similarly, customs and excise duties together are likely to fetch a handsome Rs 3.9 lakh crore, while non-tax revenue is pegged at Rs 4.05 lakh crore, marginally higher than the advance budget estimates of Rs 3.99 lakh crore. Finally, the Centre’s net tax revenue is pegged at Rs 26.26 lakh crore.

Given the increase in allocations, borrowings are estimated at Rs 16.92 lakh crore, an increase of 2.36% over the preliminary estimates of Rs 16.53 lakh crore for FY 2024, while the fiscal deficit for FY 2025 is estimated at 5.21%, slightly higher than the interim budget projection of 5.14%.

On capex, of the 14 key ministries, the Ministry of Road Transport and Highways got the cream at Rs 2.45 lakh crore. This is lower than the interim budget estimates of Rs 2.7 lakh crore and also lower than the FY24 advance estimates of Rs 2.63 lakh crore. According to Sood, we need to rethink transport policy to ensure that we stop funding vanity projects like high-speed trains and highways with poor utilisation and focus on decongesting cities and improving rail services.

Two other ministries that saw allocations of over Rs 2 lakh crore are the Ministry of Railways and the Ministry of Finance, while the Ministry of Defence saw a capex allocation of Rs 1.72 lakh crore. Again, this is lower than the interim budget estimate of Rs 1.82 lakh crore, but saw a modest jump of 4.5% over the FY24 advance estimates.

As for revenue expenditure, the Ministry of Defence and the Ministry of Finance, as usual, saw the highest allocation of Rs 4.39 lakh crore each, which is similar to the interim budget figures. However, the Ministry of Consumer Affairs, Food and Public Distribution saw a higher allocation of Rs 2.5 lakh crore than the interim budget estimates of Rs 2.1 lakh crore. Similarly, the Ministry of Agriculture and Farmers Welfare saw its revenue expenditure higher at Rs 1.39 lakh crore, while the interim budget pegged it at Rs 1.27 lakh crore.

However, the home ministry saw a reduction in expenditure of Rs 1.73 lakh crore, while the government allocated Rs 1.85 lakh crore during the February budget. Some like the ministry of health and family welfare, ministry of Jal Shakti and ministry of rural development saw allocations in line with the interim budget estimates.