The Central Statistical Organisation’s (CSO) advance GDP growth estimates released last week have sent clear signals that both the Union and railway budgets this year will have to resort to tough revenue mobilisation efforts to put the economy and the railways back on track.

Officials acknowledged that the advance estimates that project GDP growth at a three-year low of 6.9 per cent for 2011-12 indicated that infrastructure, including mining and railways, have become a drag on growth and they needed to be fixed to reverse the slowdown by pumping in large investments.

“Mining is a big problem. It has seen degrowth of 2.2 per cent. The railways, too, are pulling back growth. There is a clear need to push investments and increase railways’ contribution to GDP,” India’s chief statistician T C A Anant told Financial Chronicle.

Anant declined to say what could be the prescriptions in the budget but, according to officials, widening the tax base and reducing subsidies are two standard prescriptions to effect fiscal consolidation and ensure more money was available for infrastructure.

In the case of the railways, Anant said one would certainly have to take a closer look at revenue strategies. “When fares fall below a point and they are not economically viable, it is not a good idea,” Anant said, adding that a modest increase on an ongoing basis is better than a substantial one-time increase.

The railways must have a strategy to bring it back to viability. It is a large organisation and shows up on growth in a number of ways. Railways, which clocked 9.4 per cent growth in 2009-10, dropped to 6.68 per cent in 2010-11 and the advance estimates indicated a further fall to 5.5 per cent in 2011-12.

This is not a good sign in a country like India where the railways are an engine of growth, Anant said, adding that people have started talking about it as a hint of something drastic to be expected in the budget to revive the railways.

Railway passenger fares are expected to go up by 10 per cent. Officials indicated that instead of across-the-board fare hikes, innovative methods should be adopted.

For example, in routes like Delhi-Mumbai and other metros, fares can be raised substantially without much resistance. This can be done by working on route-based ticketing like airlines, an idea that could be easier to sell rather than a huge across-the-board increase in fares.

In so far as the general budget is concerned, a widening of tax base is already on the cards and areas that are being talked about are introduction of a negative list of exempt services, thereby bringing in more services into the tax net. This would not only lead to the soft-launch of some of the provisions proposed under the goods and services tax, but also help the government mop up substantial amounts by way of additional revenues.

The government is expected to mop up Rs 82,000 crore from service tax in 2011-12 and an additional Rs 30,000-40,000 crore could be mobilised by introducing a negative list and bringing in more services into the tax net. Another proposal that is being discussed is the likely rollback of the cut in excise duties effected as part of the stimulus package in 2009. While excise duties were cut from 14 per cent to 8 per cent in two tranches, there has been only one rollback of 2 per cent in 2010-11. There was no rollback effected in 2011-12 and this year, there is such a possibility. This can fetch the government an additional Rs 20,000-30,000 crore.

On the direct taxes front too, there could be a soft-launch of some of the provisions of the direct taxes code (DTC) by removing some of the exemptions. But there is no likelihood of any cut in tax rates, barring some tinkering with the income-tax exemption limits.

“I do not think there is scope for any significant reduction. Given the revenue constraints, expansion of tax base is on the cards,” Anant said.

With the Supreme Court verdict cancelling 122 licences for 2G telecom services and directing the government to go for spectrum auction in four months, the government may get another revenue bonanza that might be useful to partly bridge the deficit in 2012-13. Going by the 3G spectrum auction in 2010-11, some estimates suggest that the 2G spectrum auction can fetch the government up to Rs 80,000 crore. But since it would be an open auction, the proof of the pudding will be in eating.