The budget presented by Siddaramaiah continues the tradition of fiscal discipline by adhering to the fiscal and revenue deficit targets irrespective of the revenue shortfall as per the revised estimates of 2014-15.
Fiscal deficit, indicating the net liability of the Karnataka government, was 2.92 per cent of Gross State Domestic Product (GSDP) in 2013-14 and budgeted at 2.75 per cent for 2015-16. The revenue surplus representing the difference between the revenue receipts and expenditure, which has had a decline in the last two years, has been pegged at a healthy Rs 910.64 crore.
Revenue surplus enables government to increase its capital expenditure, hence a welcome development. Achievements for 2014-15 are also presented for almost all the sectors covered in the budget speech.
Allocations have been enhanced and a number of new schemes announced for many sectors. However, sectors like education and energy have reduced allocation. If budgets have to be judged merely based on the amounts allocated, (with no clue as to what it means to the sector’s development) and announcement of new schemes to appease various sections, albeit a wrong approach to assess budgets, the enhanced allocation and new schemes are welcome features of budget 2015-16. Is there an underlying vision supporting the increased/decreased allocations? Will this suffice to brand it a good/bad budget? Are the budget proposals realistic? What aspects of state finances, be it planning, execution or monitoring, need to be addressed by the government to achieve the optimal results of state’s fiscal operations?
Analysing the 2015-16 budget in the light of these issues, it appears that an opportunity is lost once again to address the serious issues daunting Karnataka such as low HDI, regional disparities and infrastructure inadequacies despite the state’s strong fiscal performance. In the first place, the revenue projections of this budget seem unrealistic.
As against a shortfall experienced in 2014-15 revised estimates of tax revenue, a much larger growth of 11.5 per cent is expected to be achieved in 2015-16.
Growth projected for non-tax revenue at 17 per cent too is very unrealistic. Revenue shortfall had resulted in cuts in plan and non-plan expenditure from Rs 57,618 crore and Rs 73,629 crore in 2014-15 budget estimate to Rs 56,886 crore and Rs 71,192 crore respectively in the revised estimate.
The 2015-16 allocations are likely to meet with similar fate in the event expected revenue cannot be generated. The increase effected to budget allocations in the past, often remained on paper, even as recent as 2013-14 budget, with a large disconnect between the allocations, releases and expenditure.Yet another major flaw that impedes development effort is rush of expenditure in the last quarter. For instance, Bhagyalakshmi , a flagship programme of the state government, has only 37 per cent of money spent up to December in 2014.
Most importantly, it is disappointing that the state with good fiscal performance is hesitant to enhance capital spending which is badly needed for the infrastructure development of the state. In the first place, the state has budgeted for only 2.75 per cent of fiscal deficit as opposed to the 3 per cent limit allowed as per the fiscal rules. Further, this fiscal year, states have been given elbow room as per the Union Budget 2015-16 to enhance fiscal deficit by 0.5 per cent of GSDP if their debt to GSDP is less than 25 per cent and interest payments less than 10 per cent.
Should the state not use this additional fiscal space to invest productively to tone up state’s infrastructure and state’s economic growth?
K Gayithri,
Professor, Institute for Social and Economic Change, Bengaluru