Financial crunch greets new Govt
Source: The Sangai Express

Imphal, April 08 2017: Even though the new State Government led by BJP has assumed office with lofty promises to bring speedy and uniform development across the State, the State's existing financial condition is not so promising.

With fiscal deficit growing bigger and bigger, the State's financial condition tells a very different tale.

The sharp increase in revenue receipts during 2010-11 to 2015-16 which saw a 52% growth, primarily due to higher inflows of grant in aid from the Centre, could not offset the surge in expenditure, both under Plan and Non-plan.

As such, it is critical that planning and budgeting are realistically formulated and expenditures are planned and prioritized strictly based on likely availability of resources.

Unrealistic assessment of resources and bloating of Plan Budgets without required resources for finan- cing annual Plans led to a severe fiscal imbalance in 2011-12 and subsequent years, the effect of which continues to linger even today.

The situation of resource crunch created by dwindling resources affected growth, led to ineffective implementation of schemes/projects since resources were very thinly spread across schemes, time and cost overruns and this has also contributed to mounting committed liabilities.

The increase in plan expenditure during this period also coincided with significant increase in non-plan expenditure, which was gradually on the rise in the previous years.

Non-plan expenditure increased from Rs 2304 crore in 2009-10 to Rs.3926 crore in 2011-12 registering a 70% growth in just 2 years, according to a status paper on Manipur State Finances published by Finance Department at the instruction of the Chief Minister.

The main contributory factors for this are implementation of 6th Pay com- mission award and major recruitments in Police, Education and Health depart- ments and Autonomous District Councils. The Non-Plan Revenue expenditure during 2016-17 is estimated at Rs 5965 crore and in subsequent years it will increase sharply with a number of fresh recruitments and regularization of contractual employ- ees carried out during 2015-16 and 2016-17 .

The liabilities were not only carried over, year after year, but also increased over the years.

As per the latest assessment, as on 15th March, 2017, the amount of fund lying in MH-8449 and MH-8443 under Public Account stands at Rs.1050 crore which are essentially plan funds of previous years.

The quantum of CSS funds yet to be disbursed to the implementing departments is estimated at Rs 592 crore.

State Plan schemes funds for Annual Plan 2016-17 disbursable is estimated at Rs 1129 crore.

These do not include outstanding liabilities for ongoing/ continuing/incomplete works for which funds are yet to be budgeted.

During 2015-16 and 2016-17 large number recruitments including regularization of Contractual employees across various departments were carried out.

The total liabilities for payment of salaries for these employees are estimated at Rs 450 crore per annum.

In order to restore fiscal balance and come back to the path of fiscal correction and fiscal consolidation, it is imperative that urgent steps are taken to improve collection of tax and non-tax revenue in the State.

In this regard, emphasis should be given on optimally tapping buoyant sources of taxes like VAT and Motor Vehicles tax.

At the same time, the surge in expenditure, particularly those that are of revenue nature needs to be arrested immediately and adequate fiscal space needs to be created for capital expenditure and investments in critical infrastructure sectors, as per the status paper.

The 14th Finance Commission award (2015-2020), abolition of Planning Commission, restructuring of Central Assistance to State Plan and abolition of Plan-Non-plan distinction have completely changed the dynamics of budgeting and Planning, particularly at the State level.

Given all these problems and challenges, the new Government must some bold but difficult choices in order to bring back fiscal balance and accelerate the pace of development in the State.

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