It is like any ordinary day except that it offers an opportunity to the government to realistically take stock of the prevalent economic and financial situation and to signal a road map for course correction to stabilise the fiscal and to reverse the economic decline. Following is an attempt to analyse and understand the Punjab Budget 2014-15 in this paradigm.
There is a near consensus among independent Punjab watchers that the state is on the verge of a precipice, both on the economic and financial fronts. The state became a revenue-deficit state for the first time in 1984-85 and clocked in an average annual growth rate, good two percentage points lower than the national average, in the past two decades. Today, it is facing the spectre not only of an empty treasury, but also being one of the least growing states in the country.
TRIPLE P MODEL COSTS STATE DEAR
How did we come to hit the rock bottom? To be fair, it is neither a sudden development, nor can it be attributed to a particular government. It is thanks to a unique triple P model of governance, which successive governments have relentlessly followed in the last three decades. The three Ps stand for populism, patronage and pandering. In terms of indiscriminate doles, the government of Punjab could easily be termed as the most populist on the globe. Instead of being a fair arbiter for citizens, patronage distribution, at an unprecedented scale, has reduced it to a clientele state. Pandering to lumpen elements in the ruling establishment has put paid to the rule of law.
To expand on this model, Punjab’s agriculture growth is premised on free electricity and water, and central procurement of wheat/rice, which is unsustainable and has damaged the health of our soil and groundwater. It has crowded out focus on productivity, diversification and establishing farm-to-fork linkages.
INVESTMENT SUMMITS CRONY CAPITALISM
For industrial growth, we have been chasing mega projects by holding investment summits, which is a thinly veiled camouflage for crony capitalism. Instead, the emphasis should have been on improving the competitiveness of the small and medium enterprises by providing affordable and assured power and enhancing ease of doing business by doing away with adversarial tax and pollution laws. For the delivery of public services like health, education, sanitation etc. the government, instead of breaking out of the nanny state mould, by involving social and private sectors and use of technology, has chosen to follow the beaten, albeit a failed track. In one of the fast-urbanising states, planned urbanisation would have been a power house of growth and employment. Instead, it has been hijacked by land sharks.
MISLEADING CLAIMS THAT ALL IS WELL
Analysed and understood in the forgoing perspective, the Punjab budget, 2014-15, signals no new direction. It is just an amalgam of sectors and schemes, without any strategic edge to resolve the financial and economic problems faced by the state. To the contrary, the finance minister Parminder Singh Dhindsa’s budget speech conveys an impression that all is well with Punjab.
Much less to signal course correction to steady the state’s finances and to break out of the stagnant growth, Dhindsa has failed even to acknowledge the problem. Instead, he has taken cover under the hackneyed prolonged militancy and declining share of central taxes. Let us see the budget as it is in support this view.
Firstly, the finance minister has indulged in misdirected rationalisation by stating that, in the last two years the state’s fiscal numbers and the rate of growth are better than national indicators.
TROUBLE WITH RATIONALISATION
The trouble with such rationalisation is that it tantamounts to comparing onions with apples. Besides, for comparison, Dhindsa has picked up two worst years of the national economy and fiscal, forgetting a decade of high growth and fiscal prudence at the national level. The finance minister should have shared with the people of Punjab where the state stood in terms of rate of growth and per capita income in the early nineties and where it is today. Besides, with such rosy fiscal indicators, how is it that the government is unable to meet even its committed expenditure.
Secondly, the finance minister has sought comfort in the belief that the ratio of the so called development expenditure to total expenditure of the state has improved from 53.4% in 2012-13 to 56.88% in 2013-14. A more reliable indicator of development expenditure would, perhaps, be ratio of capital expenditure to total expenditure, which is persistently declining.
Thirdly, Dhindsa has boasted about the increase in the size of the annual plan and improved plan performance over the years. One forgets to recall when Punjab’s plan performance was 100% and the year in which the plan size was not revised downwards in the revised estimates.
Moreover, the plan is no more than an aggregation of spending estimates of parastatals like Mandi Board, PIDB, PUDA, GMADA and under the centrally sponsored schemes. A more reliable indicator in this behalf would have been budgetary support to the plan, which has been in decline.
Lastly, the integrity of the budget numbers is suspect. Not only is there a wide difference between the budget estimates (BE), revised estimates (RE) and actuals of a relevant year, but also the art of book cooking plays in by way of fast forwarding and over-stating receipts, deferring and understating expenditure and incurring huge off-budget liabilities. For transparency, the finance minister could have attached a statement comparing BE, RE and actuals of the past 10 years, as also a statement indicating off-budget and outstanding liabilities.
(The writer is a former chief secretary of Punjab and can be contacted at firstname.lastname@example.org )