AP Budget unrealistic

It is now customary for all finance ministers to come for the presentation of budgets carrying a briefcase which is supposed to contain the secret budgetary proposals. The same will have a meaning for a budget where there are tax proposals but most of the state government budgets are expenditure budgets with no proposals for tax increase. 

In fact, most of the time what little tax increases happen in between budgets as part of a routine departmental proposal rather than as part of budget exercise. Hence on the revenue side the budget does not hold any secrets as such the secrecy and the suitcase are more symbolic in nature than have any significant value.

For Mr Yanamala Ramakrishnudu this is the 11th budget and he is presenting a record of a sort though the record for  highest number of budget presented in Andhra Pradesh may still be with Konijeti Rosaiah. Budgeting as a process of financial discipline has lost its meaning given the manner in which executive is today sanctioning new schemes cutting budgeted expenditures on certain heads increasing them under some other heads in a very routine manner. 

What essential is a power of the legislature has been taken over by the executive and supplementary demands are presented in a very routine manner at the time of the passing of the budget and approved by the legislature without any discussion. In fact, legislature has unwittingly surrendered an important tool in its hand to the executive by approving all supplementary demands without even any issues being raised questions being asked.

The budget speech of the Finance Minister runs in the familiar lines of making a reference to the division process and how the state has suffered but there is one interesting observation in the budget speech which needs a special mention. The Finance Minister questions whether with a huge deficit we could ever think of writing off farmer's loans, increase the pensions by 10 times and give assistance under pasupu kunkuma to DWACRA women? 

There is no achievement in this for the state government to take credit or a great puzzle solved. When you are in huge financial deficit and still go ahead and give freebies the  financial deficit only becomes that much bigger. Whether you would like to do it that way or not is a call a government will have to take but there is no great achievement in stating that we have given all this by incurring additional deficient.

On the expenditure side he made allocations for the pasupu  kunkuma  programme for women and annadata sukheebhava programme  for farmers. There is a  mention of Amaravati the capital city with a  financial plan of Rs 109000 crores with  Rs 34000 crores worth of works under execution but has  not presented any road map of mobilisation of resources for these massive capital works. 

Andhra Pradesh has one of the worst performing human development indicators be it infant mortality, life expectancy, literacy rate and child sex ratio. In fact, if there is one priority item for which a roadmap needs to be laid in the budget it is improving this HDI. No such road map is presented. 

More important side of the budget is how the revenues are estimated. If they are estimated unrealistically without any base expenditure on the schemes will have to be cut or if permitted more and more borrowing to be done. On this front, estimates look totally unrealistic and unachievable. Own tax revenues are expected to grow at 11 per cent. There are only two items on which state government can now  increase the sales tax post GST scenario that is  on liquor and   petrol products. 

The chances of increasing sales tax on petrol and diesel is remote  since they are already one of the highest in the country and with downward trend in crude oil prices the net income from this source may in fact go down. That leaves  only liquor as the main source of further income for the state government. On other  commodities when the general increase in GST is taken by government of India at 2 per cent it is not known how  state is expecting to get 11% increase in its taxes. 

Similarly a huge jump of Rs 10,000 crores is shown in the grants- in-aid to be received from central government. In fact after substantial increase in the central tax devolutions  grants in aid assistance may go down further. There seems to  be a lot of padding in this  item to balance the budget.  When  revenue streams fall substantially from both these accounts there will be pressure either on cutting the expenditure or going in for additional borrowing which would breach the modest 3.03 per cent revenue deficit target to GDP as projected in the budget figures. 

For a fiscal deficit of 32000 crores state is running a primary deficit of Rs 14500 crores. Which means after meeting the interest payments still this year there is an additional loan burden of  Rs 14500 crores which would add up to the debt stock and servicing costs will further go up in future. These numbers indicate  unsustainable levels of debt. In fact there is a major mistake in the budget speech where  2099 crores of revenue deficit is shown as revenue surplus which could be  typographical mistake.

Thus, the budget of Andhra Pradesh 2019 -20 is not based on realistic assessment of the revenue estimates and hence would be difficult to sustain and fulfill the expenditure projections made for the year. It is time politicians and the people realise that there is no such thing as a free lunch. If you can't generate revenue you have to borrow and borrowing and distributing freebies is not the best way of managing any economy.