Today, a general discussion on the Union Budget 2020-21 is being held in both Houses of Parliament.  In the budget, the government presented the estimates of the money it expects to spend on various ministries, and how much money will be raised from different sources such as levy of taxes and dividends from public enterprises in 2020-21.  In addition, the budget presented the revised estimates made by the government for the year 2019-20 in comparison to the estimates it had given to Parliament in the previous year’s budget.  The budget also gave an account of how much money the government actually raised and spent in 2018-19.  

What are revised estimates?

Some of the estimates made by the government might change during the course of the year.  For instance, once the year gets underway, some ministries may need more funds than what was actually allocated to them in the budget, or the receipts expected from certain sources might change.  Such deviations from the budget estimates get reflected in the figures released by the government at later stages as part of the subsequent budgets.  Once the year ends, the actual numbers are audited by the Comptroller and Auditor General of India (CAG), post which they are presented to Parliament with the upcoming budget, i.e. two years after the estimates are made.

For instance, estimates for the year 2019-20 were presented as part of the 2019-20 budget in July 2019.  In the 2020-21 budget (February 2020), the government presented 2019-20’s revised estimates based on the actual receipts and expenditure accounted so far during the year and estimations made for the remaining 2-3 months.

Is there a way to find out the government’s actual receipts or expenditure mid-year?

The actual receipts and expenditure accounts of the central government are maintained by the Controller General of Accounts (CGA), Ministry of Finance on a monthly basis.  On January 31, 2020, the CGA updated the accounts figures for the period April to December 2019.  Thus, we have unaudited actuals for the first nine months of the financial year.

How do the actual figures for the year 2019-20 so far compare with the revised estimates?

Table 1 gives the revised estimates presented by the central government for the year 2019-20 and the monthly account figures maintained by the CGA for the nine-month period April to December 2019.  The difference between these two figures gives us the three-month target that the government will have to meet by March 2020 to reach its revised estimates.    

Till December 2019, the government has spent Rs 21.1 lakh crore, which is 78% of the revised estimates for 2019-20.  While the expenditure has reached 78% of the target, so far, the government has been able to generate only Rs 11.8 lakh crore or 61% of the receipts (excluding borrowings) for the year 2019-20.  This implies that the receipts will have to grow at a rate of 41% in the three-month period January-March 2020 to meet the revised estimates of Rs 19.3 lakh crore.   So far, receipts have grown at a rate of 4%.

Table 1:  Budget at a Glance – Comparison of 2019-20 revised estimates with Apr-Dec 2019 figures (Rs crore)

Budget

at a Glance

Actuals

Revised

Nine-month period

Three-month target

Growth rate so far

Growth target

2018-19

2019-20

Apr-Dec 2019

Jan-Mar 2020

% change
  (Apr-Dec 2018 to Apr-Dec 2019) 

% change
  (Jan-Mar 2019 to Jan-Mar 2020) 

Revenue Expenditure

20,07,399

23,49,645

18,54,125

4,95,520

14%

28%

Capital Expenditure

3,07,714

3,48,907

2,55,522

93,385

21%

-3%

Total Expenditure

23,15,113

26,98,552

21,09,647

5,88,905

15%

22%

Revenue Receipts

15,52,916

18,50,101

11,46,897

7,03,204

6%

50%

Capital Receipts

1,12,779

81,605

31,025

50,580

-33%

-24%

of which Disinvestment

94,727

65,000

18,100

46,900

-47%

-22%

Total Receipts (without borrowings)

16,65,695

19,31,706

11,77,922

7,53,784

4%

41%

Revenue Deficit

4,54,483

4,99,544

7,07,228

-2,07,684

   

Fiscal Deficit

6,49,418

7,66,846

9,31,725

-1,64,879

 

 

Primary Deficit

66,770

1,41,741

5,07,411

-3,65,670

   

Sources:  Union Budget 2020-21; Controller General of Accounts, Ministry of Finance; PRS.

How do the actual tax receipts fare in comparison to the revised estimates of 2019-20?

A lower than estimated growth in nominal GDP has also affected the tax receipts of the government during the year. The 2019-20 budget estimated the nominal GDP to grow at 12% over the previous year, whereas the latest estimates suggest this growth rate to be 7.5% in 2019-20.  The revised estimates for 2019-20 show gross tax receipts of Rs 21.6 lakh crore (includes states’ share).  Till December 2019, tax receipts of Rs 13.8 lakh crore has been collected, which is 64% of the target.  The tax receipts will have to grow at 19% in the three-month period January-March 2020 to meet the target.  Table 2 shows similar comparison for the various taxes and also for the tax receipts devolved to states.  While the budget estimated a growth in receipts from all major taxes, receipts from taxes such as corporation tax (-14%), union excise duties (-2%), and customs (-12%) have declined during the period Apr-Dec 2019.

Table 2:  Tax receipts – Comparison of 2019-20 revised estimates with Apr-Dec 2019 figures (Rs crore)

Revenue

Receipts

Actuals

Revised

Nine-month period

Three-month target

Growth rate so far

Growth target

2018-19

2019-20

Apr-Dec 2019

Jan-Mar 2020

% change
  (Apr-Dec 2018 to Apr-Dec 2019) 

% change
  (Jan-Mar 2019 to Jan-Mar 2020) 

Gross Tax Revenue

20,80,465

21,63,423

13,83,035

7,80,388

-3%

19%

Devolution to States

7,61,454

6,56,046

4,76,113

1,79,933

-2%

-34%

Net Tax Revenue

13,17,211

15,04,587

9,04,944

5,99,643

-3%

57%

Dividend and Profits

1,13,420

1,99,893

1,61,979

37,914

175%

-30%

Other Non-tax Revenue

1,22,284

1,45,620

79,974

65,646

-10%

96%

Revenue Receipts

15,52,916

18,50,101

11,46,897

7,03,204

6%

50%

Note:  Figures for income tax exclude receipts from the Securities Transaction Tax.

Sources:  Receipts Budget, Union Budget 2019-20; Controller General of Accounts, Ministry of Finance; PRS.

If we look at sources of receipts other than taxes, non-tax revenue during Apr-Dec 2019 is Rs 2.4 lakh crore, i.e. 69% of the estimated Rs 3.5 lakh crore.  Disinvestment receipts till date amounted to Rs 18,100 crore, i.e. 17% of the budget target of Rs 1.05 lakh crore.  Though the investment target has been revised down to Rs 65,000 crore, it implies that Rs 47,000 crore would need to be raised in the next two months.    

How does this impact the borrowings of the government?

When the expenditure planned by the government is more than its receipts, the government finances this gap through borrowings.  This gap is known as fiscal deficit and equals the borrowings required to be made for that year.  Given lower than expected receipts, the government has had to borrow more money than it had planned for.  Borrowings or fiscal deficit of the government, till December 2019, stands at Rs 9.3 lakh crore, which is 22% higher than the revised estimate of Rs 7.7 lakh crore.  Note that with three months still remaining in the financial year, fiscal deficit may further increase, in case receipts are less than expenditure.

When we look at fiscal deficit as a percentage of GDP, the 2019-20 budget estimated the fiscal deficit to be at 3.3% of GDP.  This has been revised upward to 3.8% of GDP.  However, till December 2019, fiscal deficit for the year 2019-20 stands at 4.6% of GDP (taking the latest available GDP figures into account, i.e. the First Advance Estimates for 2019-20 released in January 2020).  This increase in fiscal deficit as a percentage of GDP is because of two reasons: (i) an increase in borrowings as compared to the budget estimates, and (ii) a decrease in GDP as compared to the estimate made in the budget.  The latter is due to a lower than estimated growth in nominal GDP for the year 2019-20.   The 2019-20 budget estimated the nominal GDP to grow at 12% over the previous year, whereas the latest estimates suggest this growth rate to be 7.5% in 2019-20.

Note that, in addition to the expenditure shown in the budget, the government also spends through extra budgetary resources. These resources are raised by issuing bonds and through loans from the National Small Savings Fund (NSSF).  The revised estimates for 2019-20 show an expenditure of Rs 1,72,699 crore through such extra-budgetary resources. This includes an expenditure of Rs 1,10,000 crore by the Food Corporation of India financed through loans from NSSF. Since funds borrowed for such expenditure remain outside the budget, they do not get factored in the deficit and debt figures.  If borrowings made in the form of extra-budgetary resources are also taken into account, the fiscal deficit estimated for the year 2019-20 would increase from 3.8% of GDP to 4.6% of GDP due to extra-budgetary borrowings of Rs 1,72,699 crore.  This does not account for further slippage if the targeted revenue does not materialise.   

Recently, the Supreme Court collegium reiterated its recommendations for the appointment of 11 judges to certain High Courts.  It had first recommended these names earlier this year and in August last year, but these appointments were not made.  The Indian judiciary faces high vacancies across all levels (the Supreme Court, High Courts, and subordinate courts).  Vacancy of judges in courts is one of the reasons for delays and a rising number of pending cases, as there are not enough judges to hear and decide cases.  As of today, more than four crore cases are pending across all courts in India.   In this blog post, we discuss vacancies across courts over the years, delays in appointment of judges, and methods to determine the adequate judge strength required to handle the caseload courts face.

High vacancy of judges across courts

Vacancies in courts keep on arising periodically due to retirement, resignation, demise, or elevation of judges.  Over the years, the sanctioned strength of judges in both High Courts and subordinate courts has been increased gradually.  However, vacancies persist due to insufficient appointments (see Figures 1 and 2).  Between 2010 and 2020, vacancies increased from 18% to 21% across all levels of courts (from 6% to 12% in the Supreme Court, from 33% to 38% in High Courts, and from 18% to 20% in subordinate courts). 

Figure 1: Vacancy of judges in High Courts

Figure 2: Vacancy of judges in subordinate courts

image

image

Sources: Court News 2010-2018; Vacancy Statement, and Rajya Sabha replies, Part I, Budget Session (2021), Department of Justice; PRS.

As on November 1, 2021, the Supreme Court had a vacancy of one judge (out of a sanctioned strength of 34).  Vacancy in High Courts stood at 37% (406 posts vacant out of a sanctioned strength of 1,098).  Since May, 2021, the Supreme Court collegium has recommended more than 130 names for appointment as High Court judges.  In three High Courts (Telangana, Patna, and Calcutta), at least half of the posts are vacant (see Figure 3).  The Standing Committee on Personnel, Public Grievances, Law and Justice (2020) noted that every year, 35-40% of posts of High Court judges remain unfilled. 

Figure 3: Vacancy of judges across High Courts (in %) (as on November 1, 2021)

image

Source: Vacancy Statement, Department of Justice; PRS.

 

 

 

 

 

 

 

 

 

Appointments of High Court judges are guided by a memorandum of procedure.  As per this memorandum, the appointment process is to be initiated by the concerned High Court at least six months before a vacancy occurs.  However, the Standing Committee (2021) noted that this timeline is rarely adhered to by High Courts.  Further, in the final stage of the process, after receiving recommendations from the Supreme Court collegium, the executive appoints judges to the High Court.  No timeline is prescribed for this stage of the appointment process.  In 2018 and 2019, the average time taken to appoint High Court judges after receiving the collegium’s recommendations was five to seven months.

As of today, over 3.6 crore cases are pending before subordinate courts in India.  As on February 20, 2020, 21% posts for judges were vacant (5,146 posts out of the sanctioned strength of 24,018) in subordinate courts.  Subordinate courts in Bihar, Haryana, and Jharkhand (among the states with high population) had a high proportion of vacancies of judges (see Figure 4).  Note that the Supreme Court is monitoring the procedure for appointment of judges to subordinate courts.

For an analysis of the data on pendency and vacancies in the Indian judiciary, see here.

Figure 4: Vacancy of judges across subordinate courts (in %) (as on February 20, 2020)

image

Source: Report No. 101, Standing Committee on Personnel, Public Grievances, Law and Justice (2020); PRS.

 

How many judges do we need?

The Law Commission of India (1987) had noted the importance of manpower planning for the judiciary.  Lack of adequate number of judges means a greater workload per judge.  Thus, it becomes essential to arrive at an optimal judge strength to deal with pending and new cases in courts.  Over the years, different methods of calculating the required judge strength for subordinate courts (where the backlog of cases in the Indian judiciary is concentrated) have been recommended (see Table 1). 

Table 1: Methods recommended for calculating the required number of judges for subordinate courts

Method of calculation

Recommendation and its status

Judge-to-population ratio: optimum number of judges per million population

The Law Commission of India (1987) had recommended increasing this ratio to 50 judges per million people.  This was reiterated by the Supreme Court (2001) and the Standing Committee on Home Affairs (2002).  For 2020, the judge-to-population ratio was 21 judges per million population.     Note that this figure is calculated based on the sanctioned strength of judges in the Supreme Court, High Courts and subordinate courts.

Rate of disposal: number of additional judges required (to clear the existing backlog of cases and ensure that new backlog is not created) based on the average number of cases disposed per judge

The Law Commission of India (2014) proposed this method.  It rejected the judge-to-population ratio method, observing that filing of cases per capita varies substantially across geographic units depending on socio-economic conditions.

Weighted case load method: calculating judge strength based on the disposal by judges, taking into account the nature and complexity of cases in local conditions

The National Court Management Systems Committee (NCMS) (2016) critiqued the rate of disposal method.     It proposed, as an interim measure, the weighted case load method, which addresses the existing backlog of cases as well as the new flow of cases every year in subordinate courts.     In 2017, the Supreme Court accepted this model.

Time-based weighted case load method: calculating the required judge strength taking into account the actual time spent by judges in different types of cases at varying stages based on an empirical study

Used widely in the United States, this was the long-term method recommended by the NCMS (2016) to assess the required judge strength for subordinate courts.  It involves determining the total number of ‘judicial hours’ required for disposing of the case load of each court.  The Delhi High Court used this approach in a pilot project (January 2017- December 2018) to calculate the ideal judge strength for disposing of pending cases in certain courts in Delhi.

Sources: Reports No. 120 (1987) and 245 (2014), Law Commission of India; Report No. 85, Standing Committee on Home Affairs (2002); Note for Calculating Required Judge Strength for Subordinate Courts, National Court Management Systems Committee (NCMS) (2016); Imtiyaz Ahmad vs. State of Uttar Pradesh, Supreme Court (2017); PRS.