Holding out hope in a hopeless situation

Ajit Pawar

Finance minister Ajit Pawar should be appreciated for holding out hope while presenting this year's state budget. He announced all possible doles and hefty allocations for welfare schemes in a shorter-than-usual speech as it seemed he didn't want to comment too much on the gloomy state of economic affairs.

But the budget's finality posed a challenge to Pawar and Chief Minister Uddhav Thackeray's tripartite government to make the allocation available in the MVA's first year of governance by plugging a wide revenue-deficit gap. Pawar does expect to collect an additional income of R21,000 crore while estimating a deficit of R9,500 crore for the year 2020-21, which itself will be a demanding task when the economic downturn threatens a depression-like situation. Pawar accepted the realities of the economy, but did not chart out a fine-tuned course of recovery even though he had the opportunity to substantiate allegations that the BJP was wrong in its economic approach. This surprised many because the MVA, Pawar's NCP in particular, has a collective experience of presenting budgets.

With the GST regime working across the country, Maharashtra, like other states, doesn't have many options of raising revenue, except for correcting its fiscal management, enforcing austerity by cutting establishment costs because R55 of every R100 that the government collects, is spent on salaries, pension and debt servicing. That leaves only R45 for development activity.

In fact, for the first time, the budget books showed that the capital expenditure of the state has reduced to 10.40 per cent of the total outlay. Another worrying factor is that debt burden is expected to cross R5.20 lakh crore (for the first time in the state) this fiscal, and income is expected to reduce while expenditure on salaries, pension and establishment will continue to eat into state income.

When asked, Pawar said he had pushed the administration to recover more in the past three months. "I have tried a hard approach in recovering more in VAT and excise duty collections," he said. Pawar and his tax collectors will also have to find ways to bring to the state coffer unrecovered revenue of R1 lakh crore which is under litigation or disputed. Of this, the state can easily recover R29,000 crore. The FM has mposed an additional value added tax on petrol and diesel but its cascading effect might result in rising prices of essential commodities. He justified the 'green fund' saying the fuel price per litre was R10 less than the previous year, and 'environment conscious' motorists wouldn't mind contributing to fight climate change and global warming.

While Pawar explained at length the downturn he didn't spell out corrective measures. The Opposition (the BJP), too, didn't present a vision while criticising the budget for its faulty approach, alleged favouritism of certain districts, and prejudiced treatment of BJP's vote blocs. As this column said last week, the event turned out to be a blame game between the MVA and BJP. Pawar blamed the deficit on the Centre for decreasing a share of central taxes by R8,453 crore and delaying GST compensation.

The BJP said since last year (the election year) was ruled mostly by the administration because of the model code of conduct and the last three months of the fiscal were with the MVA, it should not be blamed for taking a surplus budget to a deficit one. If that is so, the BJP should present a parallel vision document to show the state a path of recovery. Ex-CM Devendra Fadnavis, who last week released the third edition of his book that makes understanding of the budget easier, should prepare a budget in consultation with former FM Sudhir Mungantiwar. The step should be proactive in making the state's economy healthier.

Except for agriculture and real estate which showed some recovery, all other major sectors have taken a beating. Farming needs water for irrigation. No government seems to have taken the issue seriously. The state's growth rate is down by 2%. Industry slipped to 3.3% and the service sectors that contributed highest are showing an alarming slowdown. The per capita income of the state, which once was among the higher ones in the country, is expected to grow beyond R2 lakh this fiscal (20-21), but currently we are positioned fifth in the country. At its peak, unemployment is unlikely to be addressed for several decades policies stay unchanged. It appears that the state cannot do without raising more debt for the budgeted schemes and the projects outside the budget. The rising debt is contested by the Opposition and justified by the ruling parties. Parties in power change but the very basics of politicking remain the same.

Dharmendra Jore is political editor, mid-day. He tweets @dharmendrajore Send your feedback to mailbag@mid-day.com

Catch up on all the latest Crime, National, International and Hatke news here. Also download the new mid-day Android and iOS apps to get latest updates