State Budget: LITTLE TO CHEER ABOUT This article is being published in Orissa Post on 24.06.2014.Available orissapost/epaper/240614/p8.htm SANTOSH KUMAR MOHAPATRA ( The failure of the state government to collect tax arrears stands as a major impediments to progress of Orissa.) Finance Minister Pradip Kumar Amat presented his maiden state Budget for the financial year 2014-15 with focus on existing schemes in areas like agriculture, irrigation, infrastructure development, poverty eradication health, education, rural development, and social security and welfare schemes. The budget has evoked mixed reaction from people and political parties. The government, like in the previous year, presented a special, tailor-made separate budget for agriculture to`` boost agriculture and allied sectors as well as welfare of the farming community``. The Minister has enhanced the public investment in agriculture and allied sectors from Rs.7, 161.84 crore in 2013-14 to Rs 9542.22 in 2014-15 with a concomitant increase in the outlay for the department under plan and non-plan areas from Rs 1823.77 crore to Rs 2727.99 crore in same period. A Question arises that, when separate agriculture Budget of last year could not prevent the downslide and deterioration of agricultural sector as evident from survey, what is the need of a separate budget again? The BJD government`s excessive stress on industrialization without giving adequate attention to agriculture has resulted in a diversification of economic activities that led to a visible structural shift from an agriculture-based economy to an industry-led and service-centred economy in line with national trend leaving the agriculture in a muddle. Though the agriculture sector provides sustenance fully or partially to about 60% of population, its contribution to gross state domestic product (GSDP) has come down drastically from 70% in the early 1950s to17.49 per cent in 2012-13 and further to 15.58% as per the advance estimate for the year 2013-14. On the other hand, share of services is expected to be about 59.09 percent of GSDP followed by those of the industry -25.40%. The real annual growth rate of agriculture sector is likely to come down from 11.01% in 2012-13 to (-) 3.25% during 2013-14 at 2004-05 prices. The share of total workers in the agricultural sector, both cultivators and agricultural workers, declined from 64.7 per cent in 2001 to 61.8 per cent in 2011 with the agriculture productivity during 2013-14 having been shoddily affected due to severe cyclone ‘Phailin’ followed by recurrent floods in coastal districts in October last year. However, the above-mentioned enhancement of outlay is welcome but not sufficient to extricate agriculture from quagmire of agrarian crisis. Nevertheless, much depends upon the implementation .The capability of government is questionable especially when government is not able to revive, renovate the decrepit cold storages. Apart from bringing more arable land to the purview of irrigation facilities, the government should ensure that farmers get remunerative price for their produce .It should provide agricultural inputs to farmers at cheaper rates so as to reduce the cost of production. The government would also do well ensure that Orissa become self-reliant in production for potato, onion , fish, egg vegetables and flowers and needn’t have to import those from other states. The Finance Minister boasts of presenting budget with highest- ever outlay of Rs 80,139.58 crore which is 33 per cent higher than the outlay of Rs 60,303 crore of 2013-14 fiscal. This budgetary outlay is also higher than Poll-bound Vote-on-Account presented by former Finance Minister Prasanna Acharya before election for the April-July period of 2014-15, estimated at Rs 76,006.87 crore for the ensuing fiscal. But, this enhancement of outlay by mammoth 33% is not at all feasible in view of recent trend of declining growth. According to Economic Survey Report 2014, Orissa’s overall economic growth rate in 2013-14 is pegged at 5.60 per cent which is 2.49 per cent less compared to the 2012-13 fiscal. The overall economic growth rate in 2012-13 fiscal was registered as 8.09 percent. It means, the past Economic Survey which expected a growth rate of 9.14% in 2013-14 , has been proven complete fallacious. The huge gap between realized and predicted growth exposes the weakness and lack of adroitness of the officials associated with preparation of Survey report. The current budget assumes growth rate of 6.5 percent. Hence, with average annual headline inflation expected to hover around 6 percent, the nominal increase of GSDP supposed to be around be 12.5% only. While the budget doesn’t take in to account for higher deficit, enhancement of tax- to- GSDP ratio and higher growth of tax, non-tax revenue, and outlay increase should be nearer 12.5% only. Hence the augmentation of outlay by mammoth 33% in budget proposal is not only unrealistic, but will distort the entire provision of income and expenditure of budget. Prasanna Acharya had also presented Rs 9,421.25 crore gross supplementary budget in the state assembly for 2013-14.Hence the revised estimate for 2013-14 should be around Rs 69725 crore( Rs 60303 plus 9, 421.25 crore). But going through Odisha Budget at glance for 2014-2015 ,we will find that the revised estimate of outlay for 2013-14 is Rs 62792 .This is Rs 6935 crore less than of Rs 69725 . It means supplementary budget presented is just for record sakof record and of no avail or money allocated are not properly spent. According to Thirteenth Finance Commission, the tax- to- GSDP ratio should be more than 6.75%.But while same is around 7.6% in Chhattisgarh, 10.2% in Jharkhand, 7.6% in Madhya Pradesh in year 2011-12, the state hopes to achieve a tax- to- GSDP ratio of 6.09% in 2014-15 compared to the revised estimate of 5.93% in 2013-14.If tax –to- GSDP ratio is not enhanced especially during slowdown, more resources will not be available for development .The most tragic thing is that when there is enormous shortage of resources for developmental purpose, collection of commercial tax, water cess, electricity arrears, mining revenue and other taxes amounting to Rs 51,941.13 crore is pending due to court cases -of which Rs 46,191 crore in the mining sector alone. The failure of the state government tocollect tax arrears stand as a major impediment to progress of Orissa and its people. The Finance Minister has proposed to enhance the taxes on liquor, petrol and Diesel which will yield the exchequer Rs 375Crore per annum. The proposal to increase the tax on foreign liquor is welcome but the idea to augment the tax on Diesel and Petrol will not only increase the cost of road transport but also further increase the cost of food and other consumer products .This will further hurt the common man, who is already battered by sharp increase in prices and other inflationary trend. More resources could have been generated by imposing flat tax on diesel cars, hike in upper limit of professional tax, entertainment tax or widening the tax base or curbing tax evasion. For 2014-15, the state has yet again presented a revenue surplus Budget, projecting a surplus of Rs 4,265.55 crore (or 1.32 per cent of GSDP) compared to Rs 1,951.49 crore in 2013-14. The Budget has pegged the fiscal deficit at Rs 9,696.83 crore, 2.98 per cent of the GSDP and within the limit of three per cent set by the Fiscal Responsibility & Budget Management Act. The effort to maintain fiscal consolidation is highly appreciable. But when poverty, hunger is rampant, more money should spend for curbing regional imbalance and improvement of poor and downtrodden and generating employment. But Finance Minister preferred to bask in the glory of the revenue surplus budget rather than promising to spend more money for the poor. The revenue surplus could have been reduced to round Rs 100 crore resulting in availability of Rs4165.55 for development. The author is an Orissa based financial columnist.Email:skmohpatra67@gmail
Posted on: Tue, 24 Jun 2014 14:18:32 +0000