Contractionary budget reflects existential crisis
Source: Chronicle News Service / Prof Chinglen Maisnam
Imphal, July 31 2024:
The Manipur budget estimate for fiscal 2024-2025 is Rs 34,899.46 crore down from the budget estimate of Rs 35,022.21 crore in 2023-24 which is indicative of an expenditure contraction.
The total expenditure as a percentage of GSDP has dropped from 77.57 per cent in 2023-24 to 69.82 per cent in 2024-25 .
The Budget is, nevertheless, firmly committed to fiscal consolidation, which could be comprehended from the proposal to reduce the fiscal deficit from an estimated 6.11 per cent of GSDP in 2023-24 (budget estimate) to 3.06 per cent in 2024-25 (budget estimate) .
The budget, thus, intends to continue the trajectory of fiscal consolidation.
The Budget 2024-25 reflects state's finance is in dire straits with growing debt burden.
The Budget just presented is in the midst of a serious economic, political and social crisis.
Manipur had fallen into the financial crisis much before outbreak of Covid-19 pandemic and present ethnic violence.
The crisis deepened as the pandemic and violence gripped the state with cumulative impact of these years posing a serious challenge to state's fiscal position.
The state's Outstanding Fiscal Liabilities touches the figure of Rs 17,230.07 crore in 2024-25 .
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 economic 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 impact was felt during financial years 2021-22 and 2022-23 as well.
The revenue receipts decreased from Rs 21,520 crore in 2021-22 (BE) to Rs 14,091 crore in 2021-22 (actual) and Rs 24,447.86 crore in 2022-23 (BE) to Rs 15,893.15 crore in 2022-23 (Actual).
The revenue receipts of the budget 2024-25 are projected at Rs 27,716.45 cr.
It is crucial to ensure that the numbers being provided in the budget are reliable and close to reality.
There may be some discrepancy, but such variances should not be vast.
Some variation between BE, RE and actuals is expected.
But, if there are huge variances and revisions, it reduces the credibility of the numbers.
Therefore, it is crucial on the part of the policy makers to ensure that there is no such vast deviation between the budget allocations and the actual spending and also, there is no deviation between revenues projections and revenues realised.
A closer look at the actual figures shown in the budget indicate that this practice 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 current fiscal year.
It is likely that those contractions would have to be bigger given optimistic estimates of revenue buoyancy.
The revenue generation proposed in the budget is high on expectations since there is no substantial upsurge in tax receipts and the actuals 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.
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