THIRUVANANTHAPURAM: An election-eve budget is generally presented by finance ministers the way tennis players hit their first serve. They go for the maximum with zero risk. If an impossibly angled first serve works, it can look as devastating as black magic. If not, there is always the second serve.
In the same way, if a wildly populist election-eve budget works, a leader can create history by returning to power. If not, at least he will not be made accountable for the sweet nothings with which he had serenaded the public.
Chief Minister Oommen Chandy, in his first budget after 21 years, has withdrawn agricultural income tax, promised to distribute rice free of cost to the poor, sacrificed tax revenue from life-saving drugs, enhanced support for rubber, taken on the loan burden of students, and has refused to saddle the public with any new taxes.
The Chief Minister’s generosity looks startling, even tragic; like a man gone bankrupt standing before his gate, gifting the last of his possessions to anyone passing by.
Chandy announced an additional expenditure of Rs 1575 crore for 2016-17 but will mobilise as additional revenue only Rs 112 crore, the worst expenditure-revenue mismatch in history.
Traditionally, in the interests of fiscal prudence, tax reliefs granted will be less than 15 percent of the additional tax mobilisation. In Chandy’s budget, for the first time ever, giveaways (Rs 330 crore) are more than the additional revenue sought to be collected (Rs 112 crore); such extravagance at a time when rising expenditure and falling revenues have been highlighted as major concerns by the Economic Review.
In fact, the Review has been conveniently brushed aside. It had observed that remittances, one of the chief drivers of the state’s growth, were under serious threat. The Budget has not a single mention of the looming danger; it was as if, for Chandy, crude oil prices still ruled at the level prior to 2014.
Stranger still, in spite of giving more and virtually taking back nothing in return, Chandy has managed to bring down the revenue deficit; from 1.85 percent to 1.50 percent of the GSDP. He seems to have achieved this with a sleight of numbers, a skill perfected by his predecessor K M Mani.
Mani had always inflated his tax revenues to create a fiction of falling revenue deficit. For 2015-16 fiscal, for instance, Mani had estimated a 24 percent growth in state’s own tax revenue. The actual growth in tax revenue, the Economic Review revealed, was less than 10 percent. It has been consistently at this disappointing level for the last three years.
And now, without proposing any new measures to improve collection, Chandy claims that there will be an 18 percent growth in tax revenue. It is on this unsubstantiated optimism thatChandy’s lower revenue deficit is based.
Even Chandy’s promise to spend a lot in 2016-17, too, has to be taken with a pinch of salt. The latest CAG figures show that only 28 percent of the plan funds for 2015-16 have been withdrawn from the Treasury.
