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Friday, Aug 23, 2019

Populist measures cost state dear

While the Bharatiya Janata Party-led state government may be boasting of fulfilling its pre-election promises, the price paid to do so is quite high.

mumbai Updated: Aug 18, 2015 00:53 IST
Surendra P Gangan
Surendra P Gangan
Hindustan Times

While the Bharatiya Janata Party-led state government may be boasting of fulfilling its pre-election promises, the price paid to do so is quite high.

In the first quarter of the fiscal, the state has recorded a budgetary deficit – when the expenditure is more than the revenue earned -- of Rs5,500 crore. Major contributors to this deficit for the first four months are exemption of toll (Rs799 crore) and scrapping of the local body tax (Rs2,091 crore), along with the subsidies and relief measures for farmers, all of which were promises made by the party before being elected to power. The LBT, in fact, could add a burden of Rs4,000-crore on the state exchequer in the remaining months of this fiscal.

According to the officials of the finance department, the bleak financial situation may lead to an overall deficit of Rs12,000 crore by the end of this fiscal, and a 30% cut in government spending on development projects.

The cut, it seems, has already been imposed, with the government budgeting only 70% of the allocation for various development projects and plan
expenditure. “The actual spending has been brought down to 70% of the budgeted amount, which means they are spending only 49% of the allocation. Although we are not calling it a cut, we are heading in that direction,” said an official from the finance department, on condition of anonymity.

“The department has also proposed to defer the payment of dearness allowance of 6% to government employees. Making the payment, which is due since January, may cost the state more than Rs1,200 crore,” he said.

While the expenditure is on the rise, the revenue has dropped in the first three months of the fiscal. “The sales tax revenue has met only 95% of its estimated target. The excise and vehicle taxes, too, have met only 76.85% and 90.86% of its target collection, respectively for this quarter,” said another senior finance department official. He said if the revenue collection continues to miss its target, the state may witness its highest budgetary deficit in the recent past. This, in effect means, the next state budget would probably see more taxes or addition to current taxes.
Sitaram Kunte, principal secretary, finance, said, “It is too early to speculate on the deficit. Our aim is to reduce the expenditure and mobilise resources of revenue to achieve targets.”

Heading towards a financial crisis?

Estimated deficit for 2015-16, when the annual budget was presented in April this year: Rs3,557 crore
Deficit in four months after the budget was presented: Rs5,500 crore
Early forecast on total deficit by the end of the fiscal: Rs12,000 crore
Burden added by LBT and scrapping of toll: Rs2,890 crore

First Published: Aug 18, 2015 00:48 IST

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