Santosh Kumar Mohapatra
he finance minister of Odisha, Niranjan Pujari, presented his second full budget February 18, 2020. It was for the fiscal 2020-21. It was the first time Odisha switched to a digital budget presentation to avoid printing budget documents. As with previous years, the Budget comprised two parts — an agriculture budget, and the general budget. Besides these, the minister also presented a gender budget, child budget statement, a climate budget and a nutrition budget statement.
Odisha became the first state in the country to present Climate and nutrition budgets. According to the minister, the budget focuses on infrastructure, healthcare, education services, ecosystem, sports, and tourism. He said commitment to 5Ts along with increased investment in social and economic sectors will have a positive impact on economic growth of the state.
Normally, the budgetary outlay is decided in tandem with expected rise of nominal GDP growth. The total budgetary outlay has been pegged at Rs 1,50,000 crore as against the target of Rs 1,39,000 crore in 2019-20. The minister has avoided the blunder of unrealistic assumptions made in the Union budget.
The budgetary outlay is neither expansionary nor contractionary. It is in line with projected nominal GSDP growth 11.7 per cent (7 per cent real GSDP and 4.7 per cent inflation) which is realistic. The nominal GSDP is estimated to be Rs 5,96,280 crore in 2020-21 as against advanced estimate of Rs 5,33,822 crore the previous fiscal. In the last fiscal, it was estimated to be Rs 5,40,812 crore but was revised downward.
However, the minister does not say how 7 per cent of growth will be achieved when the growth rate is declining. Similarly, in line with the nation, in 2019-20, GSDP growth of was estimated at (7.6 per cent) and nominal growth at 11 per cent. But, real GSDP growth is estimated to be 6.1 per cent and nominal growth 7.66 per cent. In 2018-19, it was estimated that growth will be 8.24 per cent. But it was revised downward to 7.9 per cent. However, marginal difference (1.56 per cent) between nominal and real GDP growth in 2019-20 raises questions about veracity of data.
Budgetary outlay of Rs 1,50,000 crore, includes outlay of Rs 65,655 crore for administrative expenditure (non-planned), Rs 74,000 crore for Programme expenditure (planned), Rs 3,200 crore for disaster response and Rs 7,145 crore for transfer to local bodies and development authorities. Besides, it is proposed to invest about Rs 6,500 crore from off budget resources such as OMBADC, DMF and State PSUs, among others, to supplement budgetary outlay. As part of programme expenditure, while state sector schemes is fixed at Rs 44,988.10 crore, central sector schemes at Rs 456.20 crore, Central sponsored schemes at Rs 28,555.70 crore.
However, one good thing is that larger share of the outlay for programme expenditure has been assigned to capital account. The capital outlay has been enhanced from Rs 26,513.14 crore in 2020-21 (BE) from Rs 23,655.24 crore in 2019-20 (RE), which is about 4.5 per cent of GSDP. Additionally, loans and advances, grants for creation of capital assets and other expenditure for capital formation together account for Rs 10,000 crore, which is 1.7 per cent of GSDP. Since capital expenditure through public investment catalyses overall growth in the economy, rise in expenditure is a welcome measure.
However, budget reflects the impact of slowdown and cyclone Fani on state finances and growth. In line with trends of Centre, both total expenditure and receipts have been reduced by Rs 4,000 crore in revised estimates in 2019-20. The total revenue receipt for 2019-20 has been reduced from Rs 1,15,266 crore (BE), to Rs 1,11,785.25 crore (RE). But this does not owe to decline in tax revenue of the state but to decline of state’s share in Union tax, which has been revised downward from budgeted estimate of Rs 39,206.59 crore, to Rs 30,453.25 crore, in revised estimate. The gap is narrowed by rise in the state’s non-tax revenue and grants-in aid from centre.
The state government has been presenting a separate agriculture budget since 2013-14, when the outlay was fixed at Rs 7,162 crore. In 2020-21, outlay for agriculture budget was an estimated Rs 19,408 crore. But this is below target of Rs 20,716 crore in 2019-20. However, it was cut in revised estimate. According to the minister, Odisha’s agricultural GDP almost doubled in real terms, clocking average annual growth rate of about 4.5 per cent, higher than the all India average of 3.1 per cent. However, the separate agriculture budget failed to make a dent.
A reality check by Economic Survey 2019-20 reveals farmers in Odisha were quitting their profession for the lack of irrigation, inability to invest capital and lack of adequate incentives. The state is still dependent on fellow states for consumption of fish, onion, potato and eggs. Besides, our farmers suffer from the lack of storage.
The state’s own tax as percentage of GSDP (Tax-GSDP ratio) has risen from 3.56 per cent in 1999-2000 to 6.28 per cent in 2019-20 (RE), and is estimated to be 6.43 per cent in 2020-21. This, though, is better when compared with many states, but lagging target of 6.75 per cent fixed by the 13th Finance Commission.
The budget conforms to fiscal rectitude. After achieving revenue surplus of 1.6 per cent of GSDP, the fiscal deficit is projected at Rs 17,878 crore, which is 3 per cent of GSDP and within the limit prescribed under Odisha FRBM Act, 2005. Year-end debt stock for fiscal 2020-21 is estimated at Rs 1,13,237 crore, which is 19 per cent of GSDP, less than the stipulated 25 per cent limit.
The Interest Payment to Revenue Receipts (IPRR) is estimated to be 5.76 per cent, well below the prescribe limit of 15 per cent. However, the budget has failed to raise more resources. It has failed to address agrarian distress. No attempt has been made to create more jobs, especially to fill up the vacancies to tackle unemployment problems.
The writer is an Odisha-based economist. Views are personal. e-Mail: email@example.com