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Fiscal constraints & bold promises

Fiscal constraints & bold promises
Highlights

Budgets have become political documents. The economic sanctity of the budgeting exercise is becoming a mockery. The Finance Ministers give inflated projections of revenues and distribute them as expenditure across different sectors.

Budgets have become political documents. The economic sanctity of the budgeting exercise is becoming a mockery. The Finance Ministers give inflated projections of revenues and distribute them as expenditure across different sectors. But, in reality these estimates may go awry. The Telangana Budget proved to be a classic example of this harsh reality. The government has presented camouflaged data as a face-saver.


The revised estimates for the year 2014-15 have been shown exactly as budgeted estimates. Even a cursory look at the data reveals the hollowness of the whole exercise. It cannot be a mistake. It should have been a conscious decision on the part of the Finance Minister to give a feeling that ‘all is well.’ Sources in the Finance Ministry reveal that the revised plan expenditure is just 50% of the budgeted estimates. The overall revised expenditure for the financial year 2014-15 would be around 60 to 70% of the budgeted estimates. The budget documents hide this fact, which tantamount to breach of privileges of legislature.

The shortfall in central plan assistance was to the tune of 65%. The shortfall in case of non-plan assistance is to the tune of 86% during the financial year 2014-15. Similarly, there will be shortfall in the collection of VAT and revenue from land regularisation. This shortfall results in actual expenditure for the financial year 2014-15 far less than the budgeted estimates. The shortfall is expected to be as high as 35 to 40%. As such, it is difficult to analyse the budget for 2015-16. Will these estimates turn out to be a reality?

Even after such a bad fiscal experience, the Finance Minister continues to make lofty promises. These allocations are incumbent upon revenue realisation which remains a million dollar question. The Finance Minister acknowledged the adverse agrarian situation. Agriculture sector is estimated to record negative growth rate of 10.3%. Still, the allocation for agriculture has been reduced from 8.46% in the budget estimates of 2014-15 to 7.29% in 2015-16 budget. The allocations for rural development registered a steep decline (10.82% to 8.39%)

The government has rightly embarked upon a massive expansion of power generation. But, the plan outlay for this sector has declined from 3.36% in 2014-15 to 2.62% in this budget. However, the plan out lay for irrigation sector has been substantially hiked.

While reiterating commitment to KG to PG free education, plan outlay for education has been substantially slashed. The government promised to construct two bed room houses for the poor. But, outlay, especially plan outlay, has been reduced. But, allocations for welfare sector have substantially increased. In fact, the government claimed it to be the first priority. However, even these figures are subject to revenue realisation as per the estimates.

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