JOIN USFaced with ballooning expenditure on the one hand and sluggish economic growth on the other, Chief Minister Siddaramaiah will have to walk a tightrope as he presents the 2018-19 state budget at 11.30 am on Friday.
He must ensure a feel-good factor and maintain fiscal discipline ahead of the crucial Assembly elections.
Siddaramaiah, who will lead the Congress in the coming polls, is expected to woo all sections - farmers, Ahinda communities (Kannada acronym for minorities, Dalits and backward classes), state government employees, traders, women and youth - through his budget, which is the last one of his government.
The total outlay of the 2018-19 budget is expected to cross Rs 2 lakh crore. He is likely to dole out freebies like free laptops and bus passes to students and introduce more Bhagya schemes (subsidy schemes) such a Vastra Bhagya, besides announcing big-ticket infrastructure projects in major cities and towns, especially Bengaluru, in order please urban voters.
An announcement on the 6th Pay Commission recommendations, that benefits 5.2 lakh state government employees and 5.73 lakh pensioners, is also likely.
And the biggest challenge for the Chief Minister, who also holds the finance portfolio, is that he has to ensure all these without resorting to any new taxation measures, lest he antagonises the voters.
Revenue mobilisation will be a herculean task. With the economy going through a sluggish phase, there may not be any significant jump in revenue collection in the coming fiscal year.
In the current financial year, the government will barely reach its targets under four major revenue (own tax) sources - Commercial taxes, State Excise, Stamps and Registration and Motor Vehicle taxes.
On the non-tax front, it is unlikely to meet the target - it had collected just Rs 2,601 crore till September last year against the annual target of Rs 6,945 crore.
Moreover, the revenue surplus position is expected to hit rock bottom; a mere Rs 137 crores as estimated in the current year's budget, leaving very little elbow room for taking up new developmental programmes in the coming fiscal.
The tax efficiency or the tax to Gross State Domestic Product (GSDP) ratio, too, has seen a decline in the past few years.
Due to an alarming increase in expenditure in the current year, mainly on account of subsidy schemes and crop loan waiver, the government resorted to cutting down on budgetary allocations to various departments.
The fund-starved government even used cash reserves of its public sector enterprise - Mysore Minerals Ltd (MML) - to meet the additional expenditure commitments.
The Chief Secretary-headed Fiscal Management Review Committee (FMRC), which reviewed the mid-year fiscal and debt position, had recently cautioned against the mounting expenditure and advised the Chief Minister it to re-prioritise the expenditure, prune non-essential spending and revise rates of non-tax revenue sources.
If Siddaramaiah continues with his splurging spree in the coming financial year, then it is likely to affect key sectors such education, health, rural and urban development in the coming fiscal, a Finance department official, who refused to be quoted, warned.