The white paper on state finances presented by the first BJP government in Haryana is not a mere attempt to present a factual state of affairs. The presentation of the document has political undertones also.
By bringing out the “fiscal mismanagement” of the previous Congress regime, the BJP regime seems to have prepared a ground to shelve or water down the populist measures announced by the Congress government. This would also help the BJP government to justify delaying or not implementing the freebies or populist assurance made in their poll manifesto. The saffron party had promised freebies like laptops for Class 10 and 12 students, a monthly allowance of `9000 to graduate and post graduate unemployed youths working part time for 100 hours in a month and `6000 allowance for Class 12th pass unemployed youth. The party had also promised that former sarpanches and councillors will also get allowances and government employees will get pay on Punjab pattern (also promised by the Congress).
A case in point is the November 2014 decision of the state government to spread out the hike of `1000 in all social security pensions in the next five years by effecting a hike an annual increase of `200 for the next five years. The BJP in its poll manifesto had promised increasing these pensions to `2000 per month, a hike of `1000.
Laying bare open the mismanaged financial state of affairs will also help chief minister, Manohar Lal Khattar put his foot down on demands of allocation of financial resources in a partisan manner and demands of extravagant spending by ministers and MLAs.
Also, this would provide enough room for the government to introduce a new levy or upwardly revise the existing taxes. The state government has already hiked value added tax (VAT) on diesel and petrol to garner resources. Votaries of the move to prepare a white paper on finances said that it was imperative to clear the financial position in wake of the “please all” vote centric approach adopted by the Congress government. “This is a first time BJP government. It does not have a baggage. Why should it get bogged down under the weight of Congress mismanagement ?’’ asked a party leader.
‘Little spent on asset creation’
The white paper said the state government spends most of its receipts on consumption and in the past 10 years about 90% of the revenue receipts were spent on revenue expenditure and 10% on capital expenditure.
Though from 2005-2010, the capital outlay was showing a positive and rising share in expenditure, this share showed a declining trend since 2010. This indicates that the policy stance has been wavering and uncontrolled growth in revenue expenditure came in the way of a sustained growth of capital expenditure. The varying rates of growth in capital expenditure indicate a lack of stability or controlled and directed spending. While the revenue deficit was pegged at about Rs 5102 crore in 2014-15 budget estimates, sources said that it is likely to go even higher than this.
‘Funds borrowed to finance expenditure’
The paper says that as tax revenues were not able to finance Haryana’s entire expenditure, there has been a growing reliance on public debt as a major source for financing government’s expenditure over the years. “As borrowings have increased over the years, the government is also borrowing to repay old debts.
In the past 10 years, the government has used borrowings as a source of funds to meet a part of its committed non-plan expenditure ( salaries and pension) which is not a healthy sign,’’ the white paper said. It said that borrowing was not undesirable per se but they must be deployed largely for capital expenditure as well as on social infrastructure in order for the debt to be sustainable in the long term.
Thus, if the debt is used for public investment in basic economic infrastructure it will catalyze economic activity and create large positive externalities both in terms of inducing related private investment and enlarging the state’s tax base. But the trend of borrowing to finance present consumption represented by non-plan revenue expenditure is unsustainable in the long term as it does not produce future streams of income and still needs to be repaid, the white paper said.