Santosh Kumar Mohapatra
Odisha Finance Minister Niranjan Pujari, presented the State Budget for fiscal 2021-22 at a critical juncture when the economy is being ravaged by the pandemic-induced recession and central assistance is dwindling. The Budget has evoked mixed reactions. Chief Minister Naveen Patnaik described it as pro-people, pro-growth, and transformative, while the Opposition dubbed it disappointing. The finance minister said that the State Budget aimed to create an aspiration for “New Odisha ‐ Empowered Odisha” with an agenda to transform health, agriculture, education, livelihoods, infrastructure as well as industries to the next level with adequate safeguard for vulnerable sections of society.
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Normally, the budgetary outlay is decided in tandem with an expected rise of nominal GDP growth. Due to pandemic- induced recession, in 2020-21, nominal GSDP would shrink to negative 2.24 per cent against the projected rise of 11.7 per cent, while real GSDP at constant prices (2011‐12) is likely to shrink to negative 4.92 per cent against the projected rise of 7 per cent.
However, according to the State Economic Survey, the pandemic’s blow has been cushioned by the state government’s effective financial management and governance and the contraction in Odisha’s real GSDP growth is much lower than the 7.7 per cent decline projected for the national economy.
While estimating the total outlay for 2021-22, the finance minister has assumed that nominal GSDP will grow at 10.5 per cent to reach `5.86 lakh crore, still behind the estimated value of `5.96 lakh crore in the previous fiscal. However, the nominal GSDP estimated to be `5.96 lakh crore in 2020-21 has collapsed to `5.095 lakh crore in a revised estimate due to the pandemic. This shows how one years’ GSDP has been lost due to the pandemic.
The total budgetary outlay has been pegged at `170,000 crore in 2021-22 up from estimated outlay of `150,000 crore in the previous fiscal, which was also revised downward to `135,000 crore. It means the outlay has been increased by 13.33 per cent in 2021-22 against the budgeted outlay and 25.92 per cent against the revised outlay of the previous fiscal. This is much higher than projected nominal GSDP growth. The total size of the State Budget has increased from 16 per cent to 26 per cent of GSDP between 1999-2000 and 2020-21 and is likely to rise around 29 per cent in 2021-22. This is a welcome feature.
Hence, in terms of outlay, the Budget seems to be too expansionary. But if loan repayments of `23,581 crore are considered, then outlay is as usual. But the rise in outlay is far better than that of Uttar Pradesh which saw only a 7.3 per cent rise in its recent Budget.
The administrative expenditure (earlier non-planned) is estimated at `85,000 crore up from the budgeted estimate of `65,655 crore in 2020-21, which was reduced to `63,150 crore in revised estimate. The programme expenditure (planned) is estimated at `75,000 crore, higher than the budgeted estimate of `74,000 crore and revised estimate of `62,000 crore of previous fiscal. The administrative expenditure does not normally create assets directly. But as proportionate of total outlay, it is estimated to increase to 50 per cent in 2021-22 from 44.12 per cent in previous fiscal. This does not augur well.
The total State Sector Schemes is estimated to be `42874.92 crore in 2021-22 lower than the budgeted outlay and revised outlay of previous fiscal. It was pegged at `44988.10 crore but was revised downward to `36000 crore in 2021-22. This decline is due to a plunge in Centre’s assistance. Similarly, Central Sector Schemes is estimated to be `357.58 crore, down from the budgeted estimate of `456.20 which was revised upward to `480.90 crore.
A total sum of `9,164 crore is allocated for public healthcare with an increase of about 19 per cent over previous year. There was a massive investment of `12,000 crore for piped drinking water. What is shocker is that the agricultural outlay has been reduced in the last few years. From an outlay of `20,717 crore in 2019-20, it was reduced to `19,408 crore in 2020-21. The allocation for the year 2021-22 has been slashed by over 9 per cent to be estimated at `17,468 crore in 2021-22 despite the agriculture sector witnessing negative growth of 6.54 per cent in 2020-21.
The tax/GSDP ratio is estimated at 6.40 per cent in 2021-22 as against 6.43 per cent estimated in previous fiscal. Similarly, the non-tax/GSDP ratio is estimated at 3.41 per cent in 2021-22 against 3 per cent estimated in previous fiscal. This includes the withdrawal of `2,000 crore (0.34 per cent of GSDP) from Consolidated Sinking Fund (CSF) for repayment of OMB, which is shown as interest receipt in accounting terms.
Thus, the total own revenue (both tax-non tax) as a percentage of GSDP is estimated at 9.80 per cent in 2021-22 as against 9.4 per cent estimated in previous fiscal. So, no attempt is made to augment additional revenue which is a great impediment to development. What is disconcerting is that tax revenue pegged at `67636.68 core in 2021-22 is lower than the budgeted estimate of the previous fiscal (i.e., `74649.74 crore).
The Centre’s apathy is reflected from the fact that State’s share in Union tax is ebbing. It has been pegged at `30136.68 crore, lower than the budgeted estimate of previous fiscal (Rs 36299.74 crore) which was further reduced to `24549.63 crore in the revised estimate. Further, all states including Odisha are deprived of their due share from the divisible pool as the Centre is collecting around `3 to `4 lakh crore through cesses and surcharges which doesn’t go to the divisible pool.
But what is disconcerting is that the percentage share of Odisha from net proceeds of the central taxes and duties has declined from 5.16 per cent (12th FC) to 4.77 per cent (13th FC) and further to 4.64 per cent in the 14th FC. It has further declined to 4.528 per cent as per 15th FC.
While the Union finance minister presented a Budget having unfettered fiscal profligacy and mounting debt burden despite having the capacity to raise resources, Niranjan Pujari remained within the ‘Lakshman Rekha’ and fiscal prudence is being adhered to. However, revenue surplus and huge amount spent towards debt repayment are unwarranted in the present crisis. Money should have been spent more on creating jobs, providing financial assistance to those who have lost livelihood.
The author is an Odisha-based economist and columnist.
