BUDGETRAVAILS

?WE ALL have to hang our heads in shame if Uttar Pradesh is called economically weak, illiterate and a ?bimaru? (sick) State despite giving a long list of prime ministers. We commit ourselves to wash off this black spot. We have been able to do so to some extent in the last three years,? said Chief Minister Mulayam Singh Yadav, while summing up his address on the Budget for 2006-2007, on Wednesday. The Chief Minister?s observations were not out of tune. If observations made after the recent sting operation exposing three MLAs, including Minister for Backward Classes Welfare Mehboob Ali give any indication, Uttar Pradesh finds itself on an equal footing with Bihar etc, if not below them on the list of bimaru (Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh) states.

Call it ‘bimaru’, call it what you will, the fact of the matter is Uttar Pradesh seems set to end its lean phase, as far as State finances are concerned. The budget seems to reflect this fact. But then again, there is a flip side.

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“WE ALL have to hang our heads in shame if Uttar Pradesh is called economically weak, illiterate and a ‘bimaru’ (sick) State despite giving a long list of prime ministers. We commit ourselves to wash off this black spot. We have been able to do so to some extent in the last three years,” said Chief Minister Mulayam Singh Yadav, while summing up his address on the Budget for 2006-2007, on Wednesday.

The Chief Minister’s observations were not out of tune. If observations made after the recent sting operation exposing three MLAs, including Minister for Backward Classes Welfare Mehboob Ali give any indication, Uttar Pradesh finds itself on an equal footing with Bihar etc, if not below them on the list of bimaru (Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh) states.

So there appears light at the end of tunnel. A close scrutiny of the budget statistics, however, reveals that Uttar Pradesh would have to go a long way to come out of the red and figure on the list of states on the forefront of development and contribute more to national economy.

A dismal scenario prevails on the front of the State Government’s total borrowings that are expected to reach Rs 1,37,914.92 crore at the end of 2006-2007 against Rs 1,26,526.32 crore at the end of 2005-2006. If viewed in terms of debt stock to GSDP ratio, it is, however, expected to come down from 49.2 at the end of 2005-2006 to 47.9 at the end of 2006-2007. As per provisions of Uttar Pradesh Fiscal Responsibilities and Budget Management Act, 2004, besides ending revenue deficit, the State Government would also have to bring down fiscal deficit to GSDP ratio to below 3 per cent by 2008-2009 against 5.1 per cent at the end of 2005-2006. Its debt stock to GSDP ratio has also to be brought down to 25 per cent from 49.2 per cent at the end of 2005-2006.

If Uttar Pradesh’s contribution to national income was taken into account, the State’s income has remained far below the national average. As per statistics, growth in the State’s income was 2.3 per cent against national average of 2.3 per cent during the 9th Five Year Plan. At the same time, the growth in national per capita income remained 3.6 per cent 0.0 percent during the 9th Plan period.

If the State’s economic growth rate were to be evaluated, the situation is far from satisfactory.

The State Government was able to achieve only 2.3 percent growth rate in GSDP against the target of 7 per cent growth rate during 9th Five Year Plan.

Now against a target of 8 per cent, the State Government has been able to achieve an average growth rate of 3.7 per cent during the first three years of 10th Five Year Plan. The State Government has been able to achieve 0.3 per cent, 5.4 per cent and 5.2 per cent growth rate in 2002-2003, 2003-2004, and 2004-2005, respectively.

A break-up of growth rate in primary, secondary and tertiary sectors reveals that the State largely depended on the agriculture sector and has not been able to restructure economy in accordance with changes being witnessed in the national economy.

Significantly, growing instability on political horizons has had its impact on the State’s development as successive chief ministers have been presenting populist budgets and not introduced new taxes over the years. At times, new taxes have been imposed after the budget. There have been occasions in the past few years when the State Government had to revert to low plan size following its failures to increase its revenue or achieve its resource mobilisation targets.

Various measures initiated during the past few years, however, have shown some results.

Besides, the Uttar Pradesh Development Council (UPDC), set up to create a conducive environment to attract investment in the private sector, the State Government has also constituted a Cabinet sub-committee to mobilise additional resources. Another Cabinet committee has been set up to control financial expenditure. Two financial advisors of Minister of State rank have been appointed to rationalise taxes. As a result, there has been an improvement in revenue collection.

Will the State Government be able to keep up the good work? With the Vidhan Sabha elections inching closer, the State Government would find it difficult to introduce any new taxes and new measures to increase revenue. Already the Chief Minister has decided to defer the new system of categorisation of form-31 following protests from traders. Such relaxations may slow down the pace generated on the front of increasing tax revenue. The Chief Minister
is, however, sure that situation would continue to improve.

Under such a situation, the Chief Minister’s observations “Uttar Pradesh that has been witness to tales of Lord Shiva, Ram, Krishna and Gautam Buddha now faces adverse remarks for its backwardness,” have more meaning. So should have his commitment: “We are sure that we will be able to fight the evils of poverty and unemployment to bring Uttar Pradesh out of the dead end of tunnel of backwardness and on the path of development.”