Revenue dip: infra, agrI may see cuts

No new projects, development spend will be impacted, say experts; GST reimbursement delay worsens matters

Published: 16th January 2020 05:28 AM  |   Last Updated: 16th January 2020 05:28 AM   |  A+A-

Experts say the agriculture sector could see a cut in expenditure | express

Express News Service

BENGALURU: The coffers are shrinking. Revenue from major contributors like commercial taxes, excise, stamps and registration and transport is down, and is likely to impact Chief Minister BS Yediyurappa’s March 5 budget. The sectors most likely to take a hit are infrastructure, urban projects, agriculture and some flagship projects.

Member of the 14th Finance Commission, Prof M Govind Rao said, “There might be a shortfall in capital expenditure, especially with infrastructure and urban projects taking a cut.”

Former bureaucrat K Jairaj, who served with the World Bank as a management specialist, said, “The flagship programmes of the government may take a hit, and they might defer announcing new schemes. As far as expenditure is concerned, they cannot do much with pensions and salaries because they are fixed. But agriculture could see a cut in spend. Essentially, they will prioritise expenditure. Since there is a restriction on loans and borrowing and they will need to exercise prudence and abide by norms on borrowings, they might not take that route.”

Economist at National Institute of Advanced Studies (NIAS) Dr Narender Pani said, “Thankfully for the government, this is not an election year. But there will be a cut somewhere. It will be difficult to get an indication before the budget is presented.’’

Asked about the challenges before the state government in mopping up revenue in a gloomy scenario, Prof RS Deshpande, former director, ISEC, said: “The state may not be able to take up new infrastructure projects, although the older ones, with committed expenditure, may not be affected. But there will be an attempt to cut social welfare expenditure. They may stealthily close down or reduce allocation to old schemes on the social sector too, like education. The cuts may not be in nominal terms, but in real ones.’’  
He said the state treasury has a huge debt burden and also has to service debts. Besides, there are large unproductive committed expenses. Only non-tax revenue can be increased, as sources of tax revenue are at their tipping points.

Prof Sankarshan Basu, Indian Institute of Management-Bangalore, said, “The current economic scenario in India does not bode particularly well for the state, as it will be extremely difficult to raise revenue. This is further compounded by the fact that reimbursement by the Centre to the states on account of GST has not yet happened, making the situation even more dire. The state, thus, desperately needs to raise revenues in a very challenging environment, and chances are that it will not be very successful and this could lead to a huge detrimental impact in the state’s development spending.’’

However, experts point out that it may not be as bad as expected. Prof Rao says, “The situation is not as grim, because 14 per cent from GST may come as a relief to the state from the Centre, in spite of a lag.’’

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