Low economy, high spending may queer BJP's swansong budget

With the economy slowing down on the one hand and the swelling expenditure draining the coffers on the other, Chief Minister Jagadish Shettar may have to do difficult manoeuvring if he has to present a please-all budget with populist schemes ahead of elections to the State Assembly, due in May.

While it is almost certain that he may not risk hiking tax rates in view of the polls, Shettar will have to take measures to mobilise additional resources in order to achieve the dual aim of rolling out new, populist schemes, especially targeted at the poor, underprivileged and farmers, while maintaining the fiscal balance.

The Chief Minister, who also holds the Finance portfolio, is scheduled to present 2013-14 budget at 12.30 pm on February 8, and it is his maiden budget. For the ruling BJP, it is the last budget of its present regime.

But call it bad luck for Shettar. The State finances have landed in a situation that steps have to be taken for additional resource mobilisation in order to maintain healthy growth of Plan size (wherein schemes and programmes are funded).

The Government has been under severe stress following pay hike of State government employees (Rs 4,300 crore burden) and loan waiver of drought-hit, small farmers (Rs 3,630 crore) last year. The burden of ballooning expenditure is so huge that increase in Plan allocations is expected to be modest in the next few years.

With the State already achieving the highest own tax revenue to Gross State Domestic Product (GSDP) ratio of 10 per cent, tax collection is unlikely to see a quantum jump unless the economy grows at an accelerated rate. And, unfortunately for the Chief Minister, the economy continues to be sluggish -- it is expected to grow at 5.9 per cent this year against 6.4 per cent last year.

However, the government in its mid-year review of finances tabled in the Belgaum session of the legislature claimed that it will achieve excess revenue (own tax and non-tax sources) collection of about Rs 3,200 crore, which is over and above Rs 51,821 crore estimated in the current (2012-13) budget. It is also expecting that devolution from the Centre (share of central taxes) will be on expected lines at Rs 13,094 crore.

The outlay of 2012-13 budget, presented by then Chief Minister D V Sadananda Gowda, had crossed Rs 1 lakh crore. Currently, the total expenditure stands at Rs 1.10 lakh crore following two instalments of supplementary estimates. And the estimated receipts is Rs 1.02 crore (including capital receipts and public debt). The balance expenditure of about Rs 8,000 crore is expected to be financed from tax buoyancy and savings in other schemes.

According to officials involved in budget preparations, the Chief Minister may conduct a major surgery on expenditure, especially non-productive and avoidable expenditure, and allocate those funds to new schemes. He, however, may not cut allocations to subsidy schemes,  lest he antagonise voters in election season.