Budget- A mixed bag

Vishal Sharma
Budget is not just a series of statistics brought together. It is an indicator of the direction in which the state finds itself going, if, for instance, its economy is bankrolled from the extraneous resources.  And, if it has the in- house wherewithal to run its economy, the budget mirrors the direction in which the state has chosen to steer itself.
In between, there are also issues of details: For instance, how revenues are estimated to be upped; how unproductive expenditures are proposed to be pruned and, importantly, how finances are proposed to be secured for important policy measures that would help define the broader narrative of the state’s development in future. On all of this, the current budget is a mixed bag- a story of texts sensed, but some subtexts missed.
No budget analysis is complete without an analysis of its projected revenues and expenditures. As always, the scope and the scale of the projected drift can only be compared with the past achievements for informed appreciation. In this context, budget for the financial year (FY) 2014-15 does not make a very strong statement for future.
Revenue receipts in the FY 2014-2015 are projected to increase by 26 percent over the preceding year. This is a 7 percent increase over the increase recorded between the FYs 2012-13 and 2013- 2014 (RE). However, within this increase, states own tax revenue (SOR) and non tax revenue (NTR) are projected to increase only by 10 and 5 percent respectively. This does not compare favourably with the increases of SOR and NTR recorded between the FYs 2012-13 and 2013-14 (RE), which were in the order of 17 and 57 percent respectively. This projected plunge in revenues even though overall revenue receipts are projected to increase by 7 percent over the preceding fiscals of 2012-13 and 2013-2014 is explained by the increased central flows. This should be a cause of concern.
Expenditures are also projected to go up, but where capital expenditure (capex) should have shown a spike on year on year basis, it is the revenue expenditure ( revex) that is projected to increase; part of it, though, on expected lines. Capex for the FY 2014-15 is pegged to increase by 22 as against an increase of 31 percent recorded in the preceding fiscal. In contrast, FY 2014-15 sees revex projected to increase by 19 percent as opposed to a modest 10 increase recorded in the preceding fiscals. Of this, non plan revex is projected to increase by 14 percent in the budget year as opposed to 10 percent increase clocked in the preceding fiscal.
Expectedly, the biggest culprits in the non plan revex are salaries, pensions and interest payments. Salaries are calculated to grow at the rate of 20 percent while pensions and interest payments are estimated to grow at 8 and 5 percent respectively.
While all these are committed expenditures, it is not understood as to how interest outgo would increase by 5 percent only when there was an increase of 22 percent between the budgeted and the actual figures of interest outgo in the preceding fiscal. Though the projected borrowings are pegged low and, thus, provide a rationale  for the under projection, frankly, this is taking the assumptions a little too far, unless of course resource commitments from the centre are guaranteed and expected to be sufficient to finance the current year’s plan. In the absence of this, this under projection may be a window dressing.
Equally,  the budgeted and actual figures of interest and repayment outgo for FY 2013-14 are shown as same even as there is a differential increase of 33 percent in the REs over the BE s figures of the borrowings and other liabilities for the same year. This discrepancy needs to be looked into.
Budget is nothing without big ticket announcements. On this front, it does not disappoint.  Enabling interventions for agricultural and allied sectors could not have come at the better time. It is good that the government has decided to chip in with a portion of premium to kick start weather based crop insurance scheme for some identified crops on pilot basis. Insurance has been a huge issue in the sector and a hedge against crop losses would, therefore, improve the farmers’ lot and their risk taking ability.
Similarly, continuation of state mediated fiscal intervention in the national mission for micro irrigation is a step in the right direction as the scheme has been virtually a non starter in view of its design and fiscals. Most importantly, the desire to allow the CDF to be used for attending to the fiscal requirements of the agricultural sector is perhaps the best message to come out of this year’s budget. Equally, the upping of the ceiling of the stamp duty exemption for the credit received under kissan credit cards and artisan credit cards would help this fledgling venture to see more traction. Continuation of incentives in the tourism sector till March 2015 is good, but it should have been extended for one more year. This would have helped the sector to consolidate and expand on its gains. It’s only recently that the sector has started buzzing with activity with footfalls increasing every year. But incentives should go hand in hand with rapid tourist infrastructure building in the state. For a state with such natural endowments, its creaking infrastructure has to be one of the shabbiest in the world.
Reconsideration of entry tax exemptions on import of machinery in the state in favour of machinery locally produced is a sensible policy change, because it was acting as a perverse incentive against local manufacturing. However, a blanket incentive apartheid on import of machinery may not be appropriate as big infrastructural projects require big and complex machinery, which can’t be locally manufactured. A well thought through policy mix of incentives may instead be par for the course.
Public undertakings have for once caught the attention of the Government. Their accumulated owings to the Government should have been written off long years back. Unless they are deleveraged; their balance sheets are cleaned up; and in the process assisted to go to the market to raise finance, their long term survival is doomed. This one act of deleveraging them and treating their pending plan loans as equity, therefore, has to be the most important state led intervention in the recent history. But for this to yield desired results, the management, staffing and process restructuring in these undertakings would also have to be simultaneously carried out.
Lastly, budget per se is nothing more than a statement of intent. It is in a way philosophical posturing of a Government on the economic issues. Theses set of abstractions are, therefore, nothing, if they are not meaningfully later implemented. Its real test, as in the case of many other things in life, would be on the touchstone of implementation.

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