[Sawyer]

Originally Posted by Sawyer

1. Taxes collected: Rs 12 lakhs
2. Expenditure: Rs 15 lakhs - try doing this with your family budget!
3. New loans from banks - Rs 5 lakhs
4. Level of existing debt - Rs 70 lakhs
What I have not been able to find is how much of the Rs 12 lakhs in item 1 consists of salary to employees of the GOI and interest payments on existing debt. It is almost certainly more than Rs 6 lakhs and may even be close to Rs 9 lakhs. If anyone can answer that, or fine tune the above numbers, my thanks.

I have searched but not been able to find anywhere the answer to this question:
How much of the Rs 12 lakhs - if that is modelled to be the total tax revenue on all counts of GOI in a year - is salaries, pensions and the like, and how much is interest payments. Salaries here also will include the salary component of functional areas like defence, for instance, which is another subject by itself: we may have a million strong standing armed forces, but that also means that a huge percent of the defense budget is consumed by salaries including pensions, that squeezes out money available for equipment procurement and upkeep.

The salaries thing is also a consequence of way too many government jobs, that also then manifests itself in all the reservation agitations that are meant to secure a redistribution of government jobs in favour of those agitating.

Using the aforesaid figure of Rs 12 lakhs, it would be eye opening to know how much of that is spent on:
1. All sorts of salaries and pensions
2. Interest payments to service debt obligations
because it would indicate how little of the money is available/spent for all the other things that everyone expects the government to do.
My guess, and I am very happy to get a better update on this: 75%, or, in the above model, Rs 9 lakhs for these two combined.
If that is anywhere close to the truth, it says that all our taxes are being used to pay primarily the salary bill of GOI, and the interest on all the loans it has taken because of its habit of spending more than it collects.

Not a happy thought.

[binand]

Originally Posted by Sawyer

Further to the above, here is an interesting snap shot of the budget proposals that few are aware of, with confusing zeros stripped out to make it meaningful to us!:
1. Taxes collected: Rs 12 lakhs
2. Expenditure: Rs 15 lakhs - try doing this with your family budget!
3. New loans from banks - Rs 5 lakhs
4. Level of existing debt - Rs 70 lakhs
What I have not been able to find is how much of the Rs 12 lakhs in item 1 consists of salary to employees of the GOI and interest payments on existing debt. It is almost certainly more than Rs 6 lakhs and may even be close to Rs 9 lakhs.

Where are you seeing these numbers? What I see on indiabudget.nic.in is (all figures in lakh crores of rupees and are estimates for FY 2016-17):

Tax revenue:

4.9 corporate tax + 3.5 income tax + 8.5 indirect taxes - 6.0 states' share of central taxes = 10.9.

Non-tax revenue:

0.5 interest + 1.5 dividend + 1.7 railways + sundry other revenue = 5.8.

Expenses:

5.0 interest + 1.8 defense + 1.5 pensions + 1.6 railways + 2.9 grants etc. + department-wise expenses = 19.9.

Revenue deficit = 19.9 - (10.9 + 5.8) = 3.1.

They don't specify how much is salary, but I guess we should consider all of the "department-wise expenses" as "cost of running government departments" (but not counting defense & railways) - though I guess it is actually salaries + establishment costs + travel + stationery + everything. So salary as a percentage of tax then works out to 7.1/10.9 = 65%.

To this we should add pensions, and salaries in defense and railways. It is then not unlikely that all of the tax revenue goes in paying the babus (a position that I have maintained for many years - that the taxes we pay is only covering the babudom's salary bill and not the new roads and bridges and airports and stuff).

[Sawyer]

Originally Posted by binand

Where are you seeing these numbers?

It is then not unlikely that all of the tax revenue goes in paying the babus (a position that I have maintained for many years - that the taxes we pay is only covering the babudom's salary bill and not the new roads and bridges and airports and stuff).

The numbers are from Times of India, by removing some zeros to make things scaled down to be more comprehensible; I have not verified them personally, but ought to be good enough to get a sense of how tax collection, expenditure and borrowings relate to each other.

My suspicion is that it isn't all for salaries as you fear, but also for interest on total debt; but that does mean that little is left for infrastructure except by taking on even more debt.

Which of course means that the interest burden keeps going higher from year to year.

And this of course is the accumulation of sins of the last many decades, nothing that a new GOI can correct overnight. But what is depressing is that nothing is being done to even stop things from going further downhill.

Bottomline though is that there is little that the GOI can do in the budget for us because there is nothing left in the kitty of significance once all salaries are paid, and interest is paid on total borrowings. Which is why I don't bother to read the budget proposals anymore.

[binand]

Originally Posted by Sawyer

My suspicion is that it isn't all for salaries as you fear, but also for interest on total debt; but that does mean that little is left for infrastructure except by taking on even more debt.

Note that I have mentioned Rs. 5 lakh crore separately in the expenses side as interest. That is our government's interest burden. Total outstanding debt is about 60 lakh crore, so the interest works out to approximately 8.3% (some part of this is the market stabilisation scheme in force after demonetisation; that will go away next year).

That there is nothing left over in the revenue side after paying the babus is a fact of life for many years now (this is true for not just the union, but the states as well. And some states are worse off than others.). Which is why they want to augment capital account receipts by divestment of PSUs, leasing goverment real estate, auction of natural resources (spectrum, mines...) etc. Further, they don't want to foot the bill for capital investment upfront any more; instead now we rely on things like BOT, greenfield investments, PPP with VGF and suchlike for infrastructure.

Not that these are outright wrong; just that the underlying issue has been evident for a decade or more and various tricks are employed to hide the issues or work around them.

[Sawyer]

Originally Posted by binand

instead now we rely on things like BOT, greenfield investments, PPP with VGF and suchlike for infrastructure.

Presumably the anticipated value of these efforts are built into the budget estimates already!
What works for GOI is the illiteracy of even the literate for seeing through such stunts; what hope then that others will see them for what they are?
But all will pay the price for these in the years to come; and all of this will compound the consequences of jobless growth.
Over the long term, there are NO free lunches.

[vsrivatsa]

My two cents, I think the Govt. took away more than what it gave to Individuals:

1. Claiming home loan interest tax break on rented house? Budget 2017 has bad news for you : URL

2. And of course one needs to wait and watch how they implement GAAR and if it would kill the Car Lease schemes that exist today