Budget rings bleak economy

Times of India, June 12, 2009

BHUBANESWAR: Good politics could mean bad economics. This became evident on Thursday when finance minister Prafulla Ghadai presented the annual
state Budget of Rs 35,001.45 crore for 2009-10 in the Assembly. The alarm bells started ringing when the revenue deficit was shown at a whooping Rs 2369.10 cr, which could force Orissa to stare at a situation comparable to 1999-2000 when finances were in the doldrums.

Ghadai, who had in February presented a four-month interim budget ahead of the polls, expectedly did not unveil any new scheme or levy any new tax in his latest annual budgetary exercise, his sixth since becoming the FM in mid-2004. He chose to continue with various ongoing development initiatives and providing matching grants for centrally sponsored schemes. The good news was Ghadai announced Rs 90 cr for 460 watershed projects in Koraput, Malkangiri, Rayagada, Nabarangpur, Kandhamal and Mayurbhanj; Rs 40 cr towards crop loan interest reduction from 7 to 5 per cent; Rs 10 cr for an agriculture college at Bhawanipatna and Rs 1153 cr under Accelerated Irrigation Benefit Programme.
He further allocated Rs 13.86 cr for infrastructure development to tackle Naxalism; Rs 7 cr for Capital Hospital, Bhubaneswar; Rs 9.77 cr for promotion of handloom and handicrafts; Rs 80 cr to WODC; Rs 5 cr for Ravenshaw University; Rs 50 cr for construction of 1000 hostels for SC, ST girls; Rs 7 cr for triple IIIT; Rs 15 cr for water, electricity and railway over bridge (ROB) for IIT; Rs 5.50 cr for OCAC Incubation Tower; Rs 60 cr for ROB at Lingaraj Road, Bhubaneswar; Rs 10 cr for Employment Mission; Rs 30 cr for 30 new fire stations and Rs 50 cr to one lakh women self-help groups.The bad news was the possible return of revenue deficit.
Although the Naveen Patnaik dispensations spendthrift attitude in the months preceding the elections had contributed to the scary fiscal scenario, Ghadai, through obvious jugglery of figures, tallied the income as well as outgo under the revenue, capital and public accounts at Rs 60,962.26 cr to paint a balanced picture. But the consolidated fund, comprising the revenue and capital accounts, showed a total deficit of Rs 1825.03 cr. While the revenue receipts (totaling the states own tax, non-tax, share from central taxes and grant-in-aid from the Centre) has been pegged at Rs 26550.09 cr, the revenue expenditure has been assumed to be Rs 28919.19 cr. This leaves a gaping hope worth Rs 2369.10 cr under the revenue head. In the capital account, income has been estimated at Rs 4422.43 crore while expenditure stands at Rs 3878.36 crore, giving a surplus of Rs 544.07 cr. The fiscal deficit, combining revenue deficit and capital expenditure, has been calculated at Rs 6004.32 crore.

"On the whole it is a balanced budget with revenue deficit," remarked Ghadai, notwithstanding the fact that the state is now forced to mull open market borrowing after a gap of three fiscals. Revenue and fiscal deficit were a permanent feature for Orissa from 1984-85 till 2005-06, when it recorded a surplus of Rs 481.19 crore. The trend continued in the subsequent fiscals. But with implementation of the sixth pay commission recommendations swelling the annual salary and pension bill by Rs 2100 crore, grant-in-aid for teachers consuming hundreds of crores in excess and various welfare schemes milking the exchequer dry, Ghadai and Co are aiming to make up the fiscal mismatch through loans.