State budget fails to provide growth charter

Preparation and presentation of an effective budget is an opportunity to review the qualitative and the quantitative achievements, shortcomings in the previous year’s performance and to articulate the vision document for the current financial year with the focus on all-round economic growth with social justice. 

Unfortunately, Karnataka Chief Minister Siddaramaiah has missed a golden opportunity of providing a growth charter for the state and seems to have lost in the muddle of just allocating funds and doling out grants to appease certain sections of the society and institutions- perhaps keeping in view, elections to the gram panchayats and the Bruhat Bangalore Mahanagara Palike (BBMP). The allocation of Rs 4,770 crore to BBMP, BDA and BMRCL – all of which are neck-deep in corruption and mismanagement - and Rs 16,356 crore for the welfare of certain sections of society with intangible goals, validates the agenda. The third year budget of the Congress government should have been growth oriented on a fast track basis with emphasis on job creation, fiscal consolidation and prudence which the budget has not addressed.

It has also not enumerated concrete programmes for infrastructure development, housing, irrigation, permanent storage facilities for perishable crops, meat and meat products, yield improvement programmes for crops etc. Focus on agricultural growth was critical at a time when the growth declined to 4.5 per cent in 2014-15. The foodgrain production has slipped to 115 lakh tonnes against a target of 119 lakh tonnes on account of chronic drought for the past few years. The “Krishi Bhagya” and the “Pashu Bhagya” schemes for the drought affected 23 districts are sketchy. The agriculture sector, which has huge labour dependence of more than 50 per cent of the state population and contributes nearly 15 per cent to the Gross State Domestic Product (GSDP), deserved a better treatment. 

To add insult to injury, the allocation to agriculture and horticulture has been reduced by Rs 568 crore for 2015-16 vis-à-vis the previous year. The document should have focused on policies to improve the living standards of the labour force in the agrarian sector, schemes to provide timely credit, high quality seeds, fertilisers by plugging leakages and eliminating middlemen, better support prices to crops, uninterrupted power supply, employment generation, skill development programmes for the rural youth to get themselves equipped to migrate for gainful employment from farm to factory.  

Nearly seven lakh youngsters in Karnataka require jobs every year and the budget is conspicuously silent on this critical issue. The budgetary allocation to education as well as home department is cut by Rs 1,305 crore and Rs 400 crore, respectively, as against the previous year. Allocation to “food” is less by a staggering Rs 2,354 crore compared to the previous year may be realising the monumental blunders committed in the operation of the Anna Bhagya and other related schemes. 

Focus on power reforms and irrigation programmes has been skewed. There are no concrete programmes to augment the effective use of the existing power generation capacity, measures to plug power theft, which is rampant especially with regard to the illegal irrigation pump sets (IPs) and huge mismanagement in the area of supply of free electricity to around 26 lakh IPs without meters. There is no road map in the budget for harnessing alternative sources of energy like the solar and wind power.

White Paper needed
It would have been ideal for the CM to have presented a White Paper on the financial health status by critically reviewing the achievements of the previous year under all the sectors of the economy vis-à-vis the committed growth parameters. This would have been appropriate in the backdrop of many critical departments who have not even utilised the budgetary allocations of the previous year and benefits of welfare schemes like Anna Bhagya and Ksheera Bhagya not reaching the target group on account of fake BPL and Aadhaar cards. A high powered committee with CM as chairman should have been constituted to review quarterly performance on funds utilisation, realisation of goals, efficacy of welfare schemes. He can do so even now as it can serve as a continuous , comprehensive evaluation and will not be caught “napping” at the end of the year.

The revenue shortfall is Rs 4,976 crore out of which shortfall in tax revenue itself is Rs 1,315 crore and Rs 350 crore from stamps and registration. Steps should have been taken to augment housing under the affordable segment including provision of lands at reasonable rates under the PPP model to the developers which would have triggered growth and augmented revenues. It would have had the multiplier effect in developing 130 small and ancillary industries related to housing and building materials. Whipping the winning horse by levying additional 1 per cent tax on petrol and diesel to raise resources is a regressive step which will have cascading effect on the prices of essential goods and services leading to hardship to the people and build inflationary pressures.

Karnataka is experiencing financial stress. The government is borrowing Rs 22,950 crore taking the total debt to Rs 1,80,815 crore, almost reaching the cap of 25 per cent of GSDP, projected at Rs 7.36 lakh crores for FY16, as mandated by Karnataka Fiscal Responsibility Act. This implies that there will be no elbow room for further borrowings which will impact the schemes and programmes. Blaming the Central Statistical Organisation on the methodology of calculating the GSDP which has given lesser weightage for software exports will not help. 

The efficacy of the budget depends on the political will, administrative acumen, fiscal prudence, austerity and in the honest implementation of the programmes. Otherwise, the budget will be one more calendar event, full of sound and fury, signifying nothing.

(The writer is a banker based in Bengaluru)

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