Budget needs to focus on revenue buoyancy path
Source: Chronicle News Service / Prof Chinglen Maisnam
Imphal, February 21 2023:
The Manipur budget estimate for fiscal 2023-2024 is Rs 35,022.21 crore.
It is less than the revised budget.
The Budget 2023-24 reflects state's finances are in dire straits with growing debt burden.
The Budget 2023 24 just presented is in the midst of a serious economic crisis.
Manipur had fallen into the financial crisis much before the Covid pandemic.
The crisis deepened as the pandemic gripped the state.
The Budget speech has rightly admitted that state's economy is facing a serious crisis owing to Covid pandemic.
The period also witnessed considerable reduction in resource receipts.
The impact was felt during financial year 2022-23 as well.
The cumulative impact of these years has posed a serious challenge to state s fiscal position.
The state's Outstanding Fiscal Liabilities touches the record figure of Rs 18,028 crore.
It increased to Rs 18,028 crore in 2023-24 from Rs 15,353 crore in 2021-22 .
The internal debt also increased from Rs 9967 crore to Rs 12,260 crore in the same period.
The Outstanding Fiscal Liabilities as percentage of the GSDP as per the Budget document is almost 40 per cent in 2023-24 .
One main reason for the high amount of borrowings would be large repayment commitment.
The repayment has to come mainly from fresh borrowing.
If the state continues to borrow, the state government will have to pay more interest.
This will not only slow down economic growth but also burden future generations.
Amidst the revenue constraints, the budget has announced a limited measures focusing on inclusive growth.
The Budget has not made it clear from where funds will come to meet the expenditure.
If the Centre does not deliver funds as anticipated in the budget, the budget proposal will remain on paper.
The budget, of course, has provided certain provisions in critical sectors which include rural sector, employment generation, MSEs and Startups and the revival of the agriculture sector, infrastructure and social sector expenditure including education and health.
Tourism is one main focus of this budget.
It has rightly observed "Tourism is the sector with the highest potential.
It can provide massive employment, bring investment and also contribute to the economic growth of the State" .
The Budget is, nevertheless, firmly committed to fiscal consolidation.
Evidence of that is the proposal to reduce the fiscal deficit from an estimated 6.88 per cent of GSDP in 2022-23(revised estimate) to 6.11 per cent in 2023-24 (budget estimate).
The budget, thus, intends to continue the trajectory of fiscal consolidation.
"Fiscal consolidation is a top priority of this Government.
Like I mentioned before, a robust and stable public finances is important for the State to grow and develop.
We will continue to focus on increasing our revenue receipts and concurrent reduction of our debt stock".
It is to be achieved partly through mobilising additional receipts and partly by restricting expenditures.
The final numbers would absolutely vary, but this is the firm intent of the budget.
A closer look at the actual figures shown in the budget indicates that this practise of fiscal consolidation relies more on expenditure lessening rather than revenue mobilisation.
This attempt at fiscal consolidation is reflected in the total expenditure for the next fiscal year.
The budget estimates for 2023-24 shows a decline in total expenditure compared to revised estimates of 2023-24 which is indicative of an expenditure contraction.
It is likely that those contractions would have to be bigger given optimistic estimates of revenue buoyancy.
The budget 2023-24 proposes a total expenditure of Rs 35,022 crore less than revised estimates for the current fiscal which is Rs.35882.43 crore.
This budget attempts to bring down fiscal deficit from 6.88 % of the GSDP to 6.11 % in the next fiscal by curbing expenditures and on unlikely projections on revenue mobilization in the background of uneven growth.
The revenue generation proposed in the budget is high on expectations since there is no substantial upsurge in tax rates and the revised estimates in revenues in the past.
It fell short of the budget estimates which ultimately stimulated further cut in expenditures.
The budget needs to orient towards a less painful fiscal consolidation through a revenue buoyancy path.