Incremental approach

Thanks to hyperactive media, governments seem to be taking extra care to package budgets. The Andhra Pradesh government may have myriad differences with Telangana government on many contentious issues. But, there seems to be a remarkable coincidence in attractively packaging budget estimates to make catchy headlines. But, a perusal of the proposals and a reading between the lines tell the reality.

The total volume of fiscal resources available to the Finance Minister Yanamala Ramakrishnudu remains almost same. There was only a negligible increase in the kitty. In the wake of 14th Finance Commission‘s recommendations, it was suggested that Central transfers to states would substantially rise. If so, why did the size of the State budget in Andhra Pradesh rudely refuse to expand? This raises the fear that the Centre was simply routing the money going to States through various central schemes as statutory transfers, in which case the total quantum of fiscal resources available to the State may not actually rise. The fact that the total size of the budget for 2015-16 is almost the same as for 2014-15 lends credence to the fears regarding the so-called bonanza for the States.

While expressing displeasure over the lukewarm response of the Centre to help the State, Chandrababu Naidu hopes the Modi government would ultimately deliver on the promises. If the current fiscal failed to see any resource help for the State and the next year is hoped to see it happen, why didn’t Finance Minister expand the size of the budget? This shows that despite political rhetoric, the State government is skeptical of Centre’s help.

The much-trumpeted capital did not get any substantial allocation. The State budget has allocated over Rs 3,000 crores and the Centre has recently granted Rs 1,000 crore. How can the first phase of the grand capital be accomplished in three years with such paltry allocations? It perhaps means the capital would be left to the public-private partnership, or else the grand plan would experience inordinate delay. The recent Economic Survey said that expectations over private capital need to be moderated. The 12th Plan document also said that the so-called PPP mode failed to attract sufficient funds. Then, how would the capital plan be implemented?

The huge fiscal deficit leaves the government with only two options. It has either to tax the people or slash the expenditure. The FM already committed that there would not be any further taxes. In such an eventuality, high fiscal deficit would result in axing allocations for social sectors, especially plan expenditure, as non-plan spending becomes inevitable. The FM has to allay these apprehensions during the legislative scrutiny of the proposals. But, given the prevailing political culture and the consequent pandemonium in the house, any serious examination of the budget estimates is certainly unlikely.