Registered with the Registrar of Newspapers for India under R.N.I 53640/91

Vol. XXVII No. 24, April 1-15, 2018

Is State budget prudent?

by A Special Correspondent

After the GST is vested in the newly constituted body of State Finance Ministers, the Central and State budgets do not evoke the IPL-kind of expectation and excitement on budget eves. However, still of interest is the impact on household budgets and on the type and quality of public services offered for the well-being of citizens.

Compared to the 2017-18 Tamil Nadu Budget, which was a incoherent flurry of allocations, such proposals as have been set out for 2018-19 are more meaningful although, in the latter, a sign of seriousness over the state’s tightening finances is missing. Nevertheless, Chennai has cause to cheer over some of the Budget proposals.

The Pallikkaranai marsh-lands of 690 ha in the City has been given Rs. 167 crore for eco-restoration over a span of five years. It is better late than never to save what is left. This is a unique expanse of space consisting of stretches of open water, shallow water, islands and mud-flats attracting a variety of birds that explore, inhabit and breed in these surroundings. It is a great pity that what was once spread over 6,000 ha has been reduced to just 690 ha because of indiscriminate encroachments and real estate vandalism. The project includes the most essential provision for barring further incursions. But we cannot help wondering, within the limits of technical requirements, why the project cannot be completed in a shorter period, say, three years. The fear is that what is stretched for so long is likely to fade out of serious focus. And longer the exposure, events have a knack of overtaking human plans. This project, if completed swiftly, would add much value to Chennai’s environs.

Flood control measures for the north and south of the City receive a timely, and what seems a substantial allocation, of Rs. 3,298 crore. Between now and the North-East Monsoon this project must be completed on a war footing. That would be a test of the mettle of the government and not the inclusion of its cost in the Budget. This project would offer protection against the City’s annual flood and its devastating impact on the poor.

To replace 3,000 buses, a sum of Rs. 4,593 crore has been set apart. The significance is more than new buses. If the sum is used wisely and with the latest e-tendering process to avoid “leakages”, we could have by this time next year, a large fleet of non-polluting buses of modern design operating on the City’s roads. This measure that seeks to replace nearly all the present fleet of 3,797 buses, combined with the Metro matching its fares with the cost of motor cycle use, could make a significant difference to the City’s pollution levels.

Most studies point to the need for major improvements to the quality of health services and raising education standards to produce students of readily employable quality and grade. A 2018 Survey by the All India Council for Technical Education shows that while Chennai ranks second in the country for employability, Tamil Nadu as a State has fallen to a poor ninth in rank. Employability is both availability of jobs and availability of suitable candidates. The Budget for 2018-19 provides for Rs. 11,638 crore for Health and Rs. 27,205 crore for Education. Only when the actual accounts are available would we know if these sums are for specific additional schemes alone or are for the two sectors. It is likely that they are in keeping with past allocations. In these two sectors, more work is needed to raise service quality even within available infrastructure rather than just additional funds.

The Budget has announced liberalisation of norms for plot coverage and other infra-structural supports to the micro, small and medium enterprises (MSME) sector. This sector has shown good response after the last Global Summit Meet 2015 with over 5,544 units having already started production. This sector has relatively higher job-creating potential per unit of investment and that too within a short gestating period. The proposals have already been welcomed by this sector. Encouraging MSMEs is a move that could yield good results.

While we may have reason to be satisfied over these proposals there is no way of knowing how well and speedily they would be implemented. This is where the weakness is – in implementation and transparency as regards the outcome. For instance, in the 2017-18 Budget, there were a few interesting proposals. Extending drip irrigation to 35,000 acres under sugarcane, diversification by increasing the area under highly remunerative horticultural crops, an innovative programme of supply chain management for perishable commodities to reduce post-harvest losses, an additional one lakh acres under micro-irrigation, with 74.47 lakh out of the total 81.18 lakh operational holdings being small and marginal holdings, launching an innovative programme for organising them into Farmer Producer Groups to promote collective credit mobilisation and technology adoption, water-body restoration of 4,778 tanks and 477 anicuts and benefiting 5.43 lakh hectares of ayacut lands are all imaginative projects that have the potential to make farming less vulnerable and more remunerative. Similarly, integrated solid waste management projects sanctioned for nine corporations, 107 municipalities and 400 town panchayats at a cost of Rs.969 crore would have been an important step towards raising sanitation standards.

But then, what happened to these projects? Were they completed or are they under execution? Have they succeeded? Do we want to have more of them or give them up because they were found unsuitable? We do not know the answers to any of these questions from the annual Budget exercise or any other easily identifiable site. In the Budget presentation speech, there are platitudes and expressions of concerns for various vote potential segments followed by sums assigned for each. It is difficult to know more about them afterwards. The Budget is not presented as a report on what happened and as a rationale for the on-coming year’s plans – funds for new schemes and more funds for old successful ones. The Budget format could be modified for transparency and accountability. A comparative study of other State budgets to ascertain if they are more citizen friendly would be interesting.

A concern not sufficiently reflected in the Budget speech is on declining financial sustainability. Fiscal deficit – that is, with reference to all expenditure, revenue and capital – has risen from Rs. 20,583 crore in 2013-14 to Rs. 44,481 crore in 2018-19. The deficit cannot but be borrowed. As there is borrowing every year, there is accumulation of outstanding debt several times the annual borrowing to be serviced. The outstanding debt at the end of March 2018 was R. 3.55 lakh crore. The interest on this could be of the order of Rs. 28,000 crore which is over 60 per cent of the fiscal deficit i.e., current borrowing. It was 50 per cent in 2015-16. More of every year’s borrowing goes for servicing past borrowings gradually moving towards the tipping point. To cut this vicious circuit, revenue should be increased through greater collection efficiency. Unproductive schemes, freebies and give-aways must be weeded out. More importantly, economic growth should be accelerated to yield more tax revenue. GST may save the situation to some extent, yielding more revenue than in the past as it has already shown a 5-6 per cent rise in the early months of its introduction between July 2017 and February 2018. To supplement it, governmental action would be required to reach the goal of financial sustainability and to secure large fiscal space for development plans. We hope the clouds of political uncertainty would clear to make good economic decisions easier.

Leave a Reply

Your email address will not be published. Required fields are marked *