E-Paper
UP needs to strike balance to meet fiscal challenge
: The Uttar Pradesh government, which presented a large budget of ₹5
: The Uttar Pradesh government, which presented a large budget of ₹5.50 lakh crore for 2021-2022, faces the challenge of striking a balance between meeting the committed expenditures and funding the budgetary allocations in coming months as the state inches close to the 2022 assembly elections.
As a large chunk of revenue receipts are spent on payment of salaries, pension and debt servicing, the state government is left with limited funds for welfare schemes and development projects scheduled to be completed before the 2022 polls.
“The state government spends more than 70% of revenue receipts on payment of salaries and pension to employees and debt servicing. It is left with hardly any financial space to fund welfare schemes or development projects,” said Yashvir Tyagi, former professor at department of economics, Lucknow University.
The state government’s budget analysis also indicates it is spending 61.3% of revenue receipts on payment of salary, pension and interest. It is spending 17.3% of revenue receipts on debt servicing.
The state government’s total receipts are estimated to be ₹5,06,181.84 crore in 2021-2022. Its total expenditure during the same period is estimated to be ₹5,50,270.78 crore. The fiscal deficit in 2021-2022 is estimated to be ₹90,729.80 crore, about 4.17% of the projected GSDP (Gross State Domestic Product).
“The state government has presented a high deficit budget for 2021-22. It has, however, not given any indication about measures to meet this deficit. Although no taxes have been proposed in the state budget, the state government may resort to imposing more taxes to meet the budgetary deficit,” said former Rajya Sabha MP and senior Congress leader Pramod Tiwari.
The state government’s GSDP projections for 2021-22 have also come into question. The state’s budgetary estimates indicated the GSDP to be about ₹17.91 lakh crore in 2020-2021. The revised estimates indicate an increase in the GSDP to ₹19.40 lakh crore in 2020-21 despite the adverse impact of Covid-19 on the economy. “The projected GSDP of ₹21.73 lakh crore in 2021-22 appears unrealistic. In 2020-21, the budget estimates indicated the GSDP to be ₹17.91 lakh crore. It may have come down to ₹16.50 lakh crore in view of the adverse impact of Covid-19 on the economy. The state may need a much higher growth rate to reach close to the GSDP projections,” said Tyagi.
Uttar Pradesh’s indebtedness is also increasing year after year. It is estimated to go up nearly three times from ₹209227.32 crore in 2011-2012 to ₹611161.85 crore on March 31, 2022. The state government claims its total indebtedness will remain at 28.1% of GSDP in 2021-22 against 28.8% of GSDP as per budgetary estimates for 2020-21 and 29.2% as per the revised estimates for 2020-21. It, however, needs to pay attention to the issue. “The state government may not fall into a debt trap under the prevailing situation. It will need to pay attention towards the growing indebtedness as this will add to the burden of debt servicing in the coming years,” said Tyagi.
The state government had estimated its total receipts to be about ₹5.0 lakh crore in 2020-21. Its receipts appear to come down to about ₹4.0 lakh crore due to the impact of Covid-19 on the economy. This includes a shortfall of ₹54.24 thousand crore in state’s share in the central taxes during the period. Its expenditure in 2020-21 is estimated to come down by ₹75.15 thousand crore under revenue expenditure head and ₹22.95 thousand crore under capital expenditure head. The state government proposes capital expenditure of ₹1,55,140 crore in 2021-22.
“The state government though increased size of annual budget in 2021-2022, it is only 7.3% higher than the previous year. It’s expenditure on revenue account remained nearly the same in 2020-21 and projections for 2021-22. A higher projection in capital expenditure head is certainly good for the state,” said Tyagi.
