LS elections may tug CM towards please-all budget

With the revenue collection depleting and cost of subsidies ballooning, Chief Minister Siddaramaiah will be hard-pressed to present a please-all budget for the fiscal year 2014-15.

 

After assuming the power last year, Siddaramaiah, who also holds the Finance portfolio, will present his second budget, on Friday at 12.30 pm.

Contrary to the State government’s expectations, revenue collection has taken a hit in the current fiscal year. The government is unlikely to reach its own tax revenue target. Siddaramaiah, as a result, will have a very limited fiscal space to accommodate new schemes and programmes in the budget, which will most likely to be vote on account for four months. 

Though he will present the budget for the full year (2014-15), he would seek legislature’s permission to draw money from the consolidated fund of Karnataka to meet the budgetary expenditure only for the initial four months.

The government had till December 2013, mobilised Rs 42,947 crore tax revenue against the target of Rs 62,464 crore (only about 68 per cent). This is the steepest fall in the State's revenue in the recent past. Devolution of Central taxes and the government of India’s contributions to various schemes too is expected to dip. 

Besides, mounting cost of subsidies, especially after Siddaramaiah announced five big subsidy and welfare schemes on Day One of assuming office, is said to have been causing severe stress on the State finances. 

The total cost of subsidy is expected to cross Rs 15,000 crore. There is a looming fear that growth rate of the State's economy may slide below five per cent in the current fiscal. 

With the Lok Sabha elections round the corner, however, the chief minister is expected to present a populist budget without burdening the tax-payers. He is unlikely to impose new taxes or increase the existing tax rates. The chief minister would try to please Ahinda (Kannada acronym for minorities, backward classes and dalits), which is considered the Congress vote bank. 

He is also expected to make some announcements aiming at pleasing urban populace, especially on the infrastructure front. However, Siddaramaiah has to do a careful manoeuvring to overcome all the fiscal constraints and mobilise resources to fund his new initiatives as well as the existing subsidy schemes.