State revenue deficit is Rs 3,840 cr

According to the government’s mid-term review of finances (till September 2009), the State is expected to suffer a revenue shortfall of Rs 3,840 crore against the projected revenue receipt of Rs 48,389 crore for the current fiscal. The total projected shortfall is expected to be commercial taxes (Rs 2,125 cr), motor vehicle taxes (Rs 263 cr) and stamps and registration (Rs 1,267 cr), the report stated.

Besides the slowdown, the government has attributed the lower tax collection to 1.5 percent cut in stamp duty, 10 percent reduction in entertainment tax and 2 percent reduction in luxury tax on the hospitality industry.

Sluggishness in the real estate market has badly hit the capital receipts, as the government expects to collect just Rs 100 crore from the sale of land this whole year. The government had estimated to collect Rs 1,900 crore under the capital receipts. This, in other words, mean that it will be difficult for the government to spend money on developmental works, especially on infrastructure. The only way out of this is market borrowing, the government has stated in the report that additional borrowing of Rs 2,800 crore may be undertaken during the fiscal.

The total expenditure is expected to reach Rs 57,055 crore this year as against Rs 52,261 crore in the previous year. The government has incurred an additional expenditure of Rs 1,879 crore for the flood-relief works in north Karnataka recently, as per the report.

As a result, the State’s fiscal deficit may cross even 4 percent of GSDP. “In spite of the Centre increasing the allowable fiscal deficit limit of the States to 40 percent, keeping the fiscal deficit within this limit will be difficult,” the report stated.

However, the government has pinned hopes on the second half of the fiscal. It expects recovery in the economy. “The global economy is showing tentative signs of recovery signaling the winding down of global recession. The shortfall in tax collection in the first half is likely to be made up to some extent in the second half,” the report stated.

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