January 15, 2019

Finance ministry has a poor forecasting record

Research Director and Senior Fellow Niranjan Rajadhyaksha & Associates Sharmadha Srinivasan and Prakhar Misra write in Mint on the trend of over-optimistic revenue estimates and under-budgeted expenditure in Union Budgets.


"Indian finance ministers have usually overestimated revenue and underestimated expenditure. In other words, Indian budgets need to be read with a sceptical eye.


We have here considered budget data from fiscal year 1998 to fiscal year 2017. The budget estimates for any particular fiscal year have been compared to the actual numbers released at the end of that particular fiscal year.


The finance ministry overestimated revenue receipts — or the sum of tax and non-tax collections—in 15 out of these 20 years. The three most important exceptions were in the fiscal years 2007, 2008 and 2011. The reason was a growth surprise combined with high inflation. The Indian economy was in the midst of an unprecedented economic boom in the first two cases and it saw a sharp recovery from the post-crisis slowdown in 2011."


Read the full article here.

Topic : Transitions / In : OP-EDS
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