Bhubaneswar: At a time when the country is grappling with economic slowdown, the state government has started tightening its belts to face any eventuality in the coming months. Unlike previous years, the Finance department has started preparations for 2020-21 Annual Budget well in advance to overcome such possible situation.
Finance secretary Ashok Kumar Meena has recently written to all the secretaries informing them about the present situation and future plan of the government. He has also given detailed time frames for completion of the budget preparation exercise.
“Global economic growth remains fragile with downside risks dominating the short-term outlook, including the recent renewed trade tensions among major economies and an observed decline in investment levels, particularly in commodity exporting economies,” Meena said in his letter.
Overall, he said, there will be a deceleration in global GDP growth from an annual rate of 3.6 per cent in financial year 2018-19 to 3.3 per cent in FY 2019-20.
“The outlook for the Indian economy is mixed. The below par performance of Union taxes and the recent reduction in corporation tax rate by the Centre may mean a decrease in Odisha’s share of Central taxes for FY 2019-20,” he apprehended.
For FY 2020-21, Meena said, uncertainty looms over state’s share in Central taxes in absence of the recommendations of 15th Finance Commission. Collection of State Goods and Services Tax (SGST) till August of FY 2019-20 has increased by about 11 per cent as compared to the previous year. However, collection of other taxes and mining revenue has been moderate, he pointed out.
He also said that the loss on account of GST will be compensated by the Centre for FY 2020-21. However, this will not be available after June 2022. Therefore, the state’s own revenues are expected to register moderate growth in the year 2020-21 primarily due to moderate to high growth expectations for the state economy. As a result, spending is expected to increase by about 12 per cent in FY 2019-20, the secretary further stated.
“The current practice does not provide for a hard ceiling, and there is limited prioritisation of expenditure proposals by departments. As part of the public finance management (PFM) reform, the state government is going to introduce a new budget making process for preparation of Annual Budget, 2020-21 to enhance budget credibility,” read the letter.
Now, the government will fix a ceiling for administrative and programme expenditure to guide expenditure estimates of all administrative departments.
Besides, the government will bring out a ‘Fiscal Strategy Paper’ in December indicating the assumptions for revenue and expenditure projections in the medium term and the outlook for the state economy and finances.