CM has task cut out on reducing fiscal deficit

The target of achieving fiscal discipline seems to be far-fetched

 
This target aimed at achieving fiscal discipline seems far-fetched if the estimated expenditure and revenue are anything to go by. The total outlay of budget 2010-11 is Rs 70,063 crore - up by Rs 10,000 crore compared to the current fiscal. Of this, Rs 53,138 crore is revenue expenditure and Rs 16,925 crore is capital expenditure.

The CM is expecting Rs 53,639 crore revenue receipts and Rs 2,903 crore non-debt capital receipts. In other words, he has to mobilise a whopping Rs 14,022 crore to achieve targeted capital expenditure in the coming year. Interestingly, the State is revenue surplus by only Rs 538 crore in 2010-11.

The CM has to bring down the fiscal deficit to 3 per cent level in 2010-11, as per the Fiscal Responsibility Act. The Centre had given special permission to cross the 3 per cent limit only for 2008-09 and 2009-10 financial years, when the economy was badly affected.

Even if the government manages to collect targeted revenue in the coming fiscal, including from own tax revenues, as projected in the budget, it’s resources will increase by around Rs 11,000 crore - Rs 3,507 crore projected natural growth in own taxes, Rs 2,000 crore additional resource mobilisation, Rs 2,903 crore from non-debt receipts (land auction and disinvestment of PSUs), 2,060 crore additional share from Central taxes and Rs 300 crore non-tax revenue growth. Ironically, in 2009-10 the Government has failed to raise anything from non-debt receipt (by selling land) against the target of Rs 2,000 crore and the State is facing a shortfall of Rs 3,383 crore from its own tax revenue.

In that event, the government will be left with only two options - either to borrow more than estimated in the budget or cut down the expenditure. Or the CM’s hope that the State’s economy will get consolidated in the coming fiscal should come true. Under the capital receipts, the CM has estimated to borrow Rs 7,028 crore from the open market, avail loans of Rs 1,530 crore from RBI, GIC, LIC and NCDC and take Rs 1,142 crore loan from the Centre in 2010-11. In 2009-10, the Government has borrowed Rs 5,953 crore from open market, Rs 726 crore from the Centre and Rs 1,180 crore from Centre’s lending agencies.