Fresh off a hard-fought election, the government’s first Budget took on dual priorities of employment generation and fiscal consolidation, and unlike earlier years, non-tax revenues are set to drive these goals.
Non-tax revenues, including those from interest, dividends and others, saw a sharper rise of around 40 per cent from FY23 to FY24 (provisional actual - PA) prompting the government to budget for ₹5.5 lakh crore in FY25 — a 36 per cent further increase from PA of FY24. In contrast, tax revenue grew around 11 per cent from FY23 to FY24 (PA) and have been budgeted around 10 per cent higher in FY25 relative to FY24 (PA).
Non-tax revenue thus contributed around 14.7 per cent of total revenue receipts in FY24 compared with 12 per cent in FY23. On the other hand, share of tax revenue has dipped from 87.9 per cent in FY23 to 85.3 per cent in FY24. Non-tax revenue for FY24 (PA) stands at 1.4 per cent of GDP and has been budgeted at 1.7 per cent of GDP for FY25.
Windfall dividends from the RBI and increased dividends from central public sector enterprises (CPSEs) helped boost non-tax revenues. The RBI gave a dividend of ₹2.1 lakh crore, which was almost twice of ₹1.04 lakh crore estimated in the interim Budget from the RBI and other public financial institutions combined. Non-tax revenue also includes interest receipts from loans extended to States and union territories.
Holistic strategy
Speaking to media persons post the Budget, Tuhin Kanta Pandey, Secretary, Department of Investment and Public Asset Management, said that the government is looking at a “holistic strategy” for managing equity in PSUs. “We are looking at a value-creation approach in terms of performance, capex and dividends along with a disinvestment strategy that includes listing and market dilution,” he said. Though targets have not been set, disinvestment strategy will continue, he added.
Analysts say improved profitability of public sector units has helped boost non-tax revenue. Government data shows that in FY24, the Ministry of Petroleum and Natural Gas earned the maximum dividends from CPSEs at ₹19,353 crore. Dividends from PFC and Coal India placed Power Ministry and Coal Ministry among other top dividend earners. For FY25, the total receipts other than borrowings (revenue receipts along with divestment proceeds) are budgeted at ₹32.07 lakh crore, which is a 15 per cent increase compared with FY24 (PA).
Ramendra Verma, Partner, Grant Thornton Bharat, says that oil PSUs had a good year and hence higher dividends was expected from them. “Further, the policy (change) in 2020 to pay dividends quarterly rather than annual is also helping,” he said. “Governments worldwide often aim to diversify revenue sources. Relying solely on taxes can be risky, especially during economic downturns,” he adds.