Revenues are not rising fast enough to meet expenditure
India’s revenue growth is weak and that is leading to a self-fulfilling factor of curbing spending on value creation, which in turn is leading to slowing economic growth and that in turn is leading to slowing revenue growth. The government has to break this cycle by taking steps to expand its revenue base.
Tax Revenues account for 81% of total central government revenues. Direct taxes that comprise of Corporate Tax, Income Tax and Wealth Tax account for 57% of total tax revenues while indirect taxes account for 43% of total tax revenues. The government shares 42% of total tax revenues with the states. Wealth tax is abolished in Budget 2015-16.
Non Tax Revenues that include dividends received by the government, disinvestment of stakes in PSU’s, spectrum auctions and license fees and interest income account for 19% of total tax and non tax revenues revenues of the central government. The government sells its stake in its entities to add to its capital receipts, which forms the disinvestment revenue.
Government receives dividends from PSU’s and the RBI, which forms 51% of total non tax revenue. RBI is the largest dividend payer to the government and is budgeted to pay Rs 644 billion to the government in fiscal 2015-16.
Government receives interest from states and the railways that forms most of its interest income.