Perils of Overestimates

Fiscal discipline is not just about meeting deficit targets—it is also about getting the estimates right

- A K BHATTACHARYA

Is there a sense of déjà vu in the recently released provisional actual numbers for the Union Budget for 2024-25? These numbers were made public at the end of last month. A quick comparison of these provisional actual numbers with the revised estimate (RE) for 2024-25 shows that the problem of revenue overestimation has resurfaced—after a welcome break of four years.

Note that the RE of the Union Budget for a financial year is released about two months before that year ends. This release coincides with the presentation of the following year's Budget. Thus, the RE of the Budget for 2024-25 was available on February 1, 2025, when the Budget for 2025-26 was presented by Finance Minister Nirmala Sitharaman. Even though the RE is an estimate for the year, it should not vary by a large margin from the provisional actual numbers made available by the end of May later that year. Ideally, an overestimation of revenue collections should be avoided, just as an underestimation of expenditure could cause problems for managing government finances.