Mumbai: Finance Minister Nirmala Sitharaman is likely to stay conservative about the nominal gross domestic product (GDP) growth and set it at 9.5-10% in the FY21 budget as the time for ‘picking optimistic target’ experiments are over, say sources.
“This year, there will be a realistic assessment of the nominal GDP,” said a source.
Revenue estimates and fiscal deficit targets are also likely to be circumspect as not to face a situation of failing to meet them as the Finance Ministry is already fighting two perceptional issues — transparency in disclosing budget data, and not to set ambitious tax revenue and fiscal deficit targets.
The Prime Minister’s Office (PMO), which is closely associated the budget — even at the micro level — has told North Block not to set over-ambitious tax and fiscal deficit targets.
Over-estimation of the nominal growth rate in an attempt to paint a healthy picture of economy to investors, market and rating agencies — as was partly done last year — gives tax officials ambitious targets to meet through tax demands and raids, causing inconvenience to investors and individuals.
The targets for direct taxes, like income tax and corporate tax, and indirect taxes, such as the goods and services tax (GST), depend on the nominal GDP.
Also, to avoid an embarrassment due to ‘clerical’ errors, North Block and PMO officials are checking broad economic statistics of budgetary documents minutely.
The government had to face a lot of criticisms as the FY20 budget had two nominal GDP growth figures.
