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Need for a Realistic Budget

Manipur is in a bad shape financially. It needs a realistic budget, and a strategy needs to be worked out on how to manage a poor state with limited revenue.

ByRK Nimai

Updated 14 Jun 2022, 5:40 pm

(Representational Image: Pixabay)
(Representational Image: Pixabay)

 

A simplistic definition of a government budget is a document prepared by the government presenting its anticipated revenues, and proposed expenditure. Through the budget, however, the government implements its economic and other policies. With very limited taxation power now, the state government is marginalised to laying down the taxation laws to its advantage.

Unfortunately, for the last many years the budget of Manipur is highly unrealistic and does not show the correct picture of the financial position of the state. Further, various pronouncements made by the Ministers are generally not reflected in the Budget thereby making the pronouncement irrelevant. Without funding nothing can be achieved on the ground.

It is expected that the full budget for 2022-23, will be placed sometime in July, 2022. As the BJP had returned with an absolute majority it will have the time and the gumption to introduce a realistic budget rather than a populist budget which is unattainable.

While introducing the Budget for 2021-22, the Finance Minister stated on the floor of the House that the pandemic had caused severe dislocations across the globe and Manipur cannot remain immune from the impact. This statement indicates that the financial and economic aspects of Manipur were also hit by the pandemic but the figures in the budget documents show a very different picture.

The GSDP for 2021-22 was estimated at Rs. 43,121.26 crore showing a growth of 14.43% which is unattainable as most of the businesses and industries were severely impacted. The only inference one can draw is that when the Budget was placed before the House the GSDP was estimated at an arbitrarily high figure to ensure that the fiscal deficit is kept below 10%!

Another example is that in the Budget documents for 2019-20, the GSDP of the state was shown as Rs. 30,131.96 crore while in the BE for 2020-21 it was indicated as Rs. 33,569.67 crore (11.41% growth) while in the RE it was shown as Rs. 37,681.93 crore (25% growth).

If the figures are true, where is the compaction in the GSDP?

Further, in the Economic Survey presented before the House for 2019-20, the GSDP was estimated to be Rs.31,989.49 crore indicating a difference of figures of  the GSDP given in the Budget at a Glance and the Economic Survey. This indicates a perfunctory approach in the preparation of the Budget estimates, without cross checking the figures.

The Budget Estimate is an estimate and one cannot be hundred per cent accurate, but it should also not vary widely from the actual revenue and expenditure. A few percentage deviations of the Actuals from the Budget or Revised Estimates are understandable but a very high deviation indicates that there is something drastically wrong in the assessment of the estimates. It indicates a rather mechanical approach in the preparation without going deeply into the issues.

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A high estimate for both revenue and expenditure is always provided traditionally in Manipur for the last many years, but at the time for expenditure, there will be curtailment in the expenditure as there is no money to foot the bill and there will always be savings, not due to the fault of the Department but due to faulty estimates.

Expenditure has been curtailed as there is shortfall in revenue and there is no concomitant revenue to support the expenditure. Such arbitrary high and unrealistic estimates make the whole exercise of Budget preparation irrelevant and as the restriction of expenditure was issued on the fag-end of the financial year, the departments just could not prioritise the schemes as the time available was too short and the whole exercise becomes irrelevant.

The Budget Estimate for 2020-21 provides for a total of Rs. 19,158.68 crore on the expenditure side, while in the  Revised Estimates it was increased to Rs. 20,931.36 crore while the Actual Expenditure as per the Budget Estimates placed for the Votes on Accounts for 2022-23, it was Rs. 11,687.40 crore.

The actual expenditure comes to 61 per cent of the Budget Estimates and 55.84% of the Revised Estimates and thus, the supplementary demands sought are illogical and arbitrary as the estimates were highly off the mark. Similar picture was seen for the year 2019-20.

The Budget Estimates for 2019-20 is Rs. 14,429.72 crore, while the Revised Estimates is Rs. 16,373.52 crore and the Actual expenditure is Rs. 9,823.00 crore which indicates that the Actual Expenditure comes to 68.01% of the Budget Estimates and 60% of the Revised Estimates. Thus one can infer that exceedingly high estimates were made in both the revenue and expenditure as a practice.

In other words, the Budget and Revised Estimates were arbitrarily increased by almost 35-40% and this only points to poor estimation as this difference is too high. A difference of say 5-10 per cent may be acceptable but not such a high difference. This has been the practice for a long time and is not only confined to the BJP-led government.

One can say that the high arbitrary figures speak about the political aspirations and are like a lullaby to make the people feel satiated that many things are in the offing. It indicates hope but when these can’t be fulfilled there may come a time when the people just distrust the government, which may impact democracy per se.

The poor condition of the roads have led the concerned Minister to come out with the statement that due to limited provisions for the maintenance of roads, the roads in Manipur could not be properly maintained.

Similar is with the case of power supply which has deteriorated during the past few years and this is mainly ascribed due to low provision for maintenance. Maintenance is a weak point of all governments in the state.

On many occasions, the pronouncement made by the Government was not matched by the budgetary provisions. Though later, during the revised estimates or in next year’s budget some provisions were provided, it delays the implementation of the pronouncement which is mainly in the interest of the people. In other words, words are not matched by action.

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It is hoped that the recent announcements that the some 79 roads will be widened or expanded will be matched by Budget provisions for 2022-23., or else it will be mere announcement without any follow up action and these roads will continue to be bad and crowded as it is.

Leaving aside the political statements, cannot the state prepare a more realistic budget which is down to earth rather than padding the figures to make it rosy?

It may not reflect good for some time to the government  as there will be limited funds for every department but as it is based on a realistic assessment, it will make the people and the political leadership realise and make them understand that financially Manipur is in a bad shape and that all need to work towards its betterment.

If the alleged unauthorised cuts imposed at various steps while implementing a government project or scheme are done away with, the limited resources can still implement quality works. The provision of providing 15 per cent contractor’s profit in the Manipur Scheduled Rate needs to be reviewed so that it is reduced to 10 per cent as done elsewhere.

If the system of sub-contractors executing almost all the civil works in Manipur is done away with and the work awarded to a competent contractor, it will definitely improve the quality of works executed.

There is no denying the fact that Manipur has serious resource limitations. Thus the only way is to prioritise the works and ensure that leakages at every step are checked.

With limited resources, it is verily impossible to satisfy all demands but prioritisation can provide an avenue where in a particular year, one sector is provided sufficient funding to make the sector sustainable in the future while for that particular year, other sectors are provided with the bare minimum.

With sufficient funds some sectors must be brought to a self-sustaining stage and so on. Politically, this may not be acceptable as no Minister will want to lord over a department with very limited funds, but for a five year term, the departments can be divided into five groups and each year full provision is provided to one group.

A strategy needs to be worked out on how to manage a poor state with limited revenue. If sincerity is there among the political leaders and the bureaucrats, efforts can be made to buttress the revenue which will reflect positively on the funds available for expenditure. And the need of the hour is a realistic budget.

(The views expressed are personal)

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First published:14 Jun 2022, 5:40 pm

Tags:

financial strategyrealistic budgetmanipur budgetfinancial policy

RK Nimai

RK Nimai

The author is a former bureaucrat, Imphal, Manipur

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