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Friday, Jun 25, 2004

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BUDGET WITH A DIFFERENCE

IN LINE WITH its pro-poor, pro-farmer commitment, the Y.S. Rajasekhara Reddy Government in Andhra Pradesh has presented its first budget with hugely enhanced allocations for agriculture and irrigation, and no new taxes. Despite these enhanced allocations, Finance Minister K. Rossaiah expects to end the year with an insignificant deficit of Rs. 49.91 crores that includes a carryover of Rs. 19.51 crores from last year. It is not clear how Mr. Rossaiah plans to accomplish this feat, given the substantially higher allocations to most of the sectors and the fact that he has not gone in for any fresh tax. Given the state of the economy, it remains to be seen whether he can depend merely on the projected buoyancy in revenue collections to provide the additional resources required to finance the plan outlay of Rs.13,291.20 crores and meet a revenue expenditure of Rs.34,151.54 crores. Aside from this, the State Finance Minister regrets the fact that he has inherited a "debt-trapped State." But the budget does not say anything about how the Congress-Telangana Rashtriya Samiti Government plans to pull the State out of this trap.

The sharp focus of the 2004-05 budget is on agriculture and irrigation, which along with the power sector account for 61 per cent of the annual plan. The allocation for irrigation alone has virtually doubled — from Rs.2,178.92 crores last year to Rs.4,245.72 crores this year — with the Government committing itself to a time-bound completion of 26 on-going and pending irrigation projects. Considering the mass distress among farmers and the continuing tragedy of suicides, it is about time the Government made the farm sector its top priority and helped the farmers come out of the crisis. But the Rajasekhara Reddy administration must also realise that success on the farm front is largely dependent on the availability of water — in time and in sufficient quantity. The Krishna delta may have to depend on Karnataka sharing water. The Chief Minister would do well to initiate a dialogue with his Karnataka counterpart and ensure that farmers are not starved of water this year, as they have been in the past three years on account of a poor monsoon.

There is real substance to the Andhra Pradesh Finance Minister's reference to an inherited debt trap. The State's outstanding public debt has risen over the past decade from Rs.15,164.25 crores to a staggering Rs.66,392.47 crores, not including loans from the Centre totalling more than Rs.20,000 crores. Servicing this debt and repaying it in time, particularly to multilateral agencies such as the World Bank, which has funded many projects and even a fiscal restructuring programme, will pose a colossal challenge. Debt servicing alone accounts for 21.87 per cent of the Government's expenses. Given the popular goodwill with which this Government has started, there has to be a conscious effort to bring the State back to normal fiscal health. Such an exercise must start immediately, before there is any talk of the honeymoon ending. While there is nothing much for industry to cheer in this budget, the manufacturing and service sectors will realise that unless agriculture picks up and rural purchasing power improves, they cannot flourish. It would be prudent for the Government not to be taken in by the current projections of revenue buoyancy. It must plan for a mid-year review so that course corrections, if necessary, can be made in time to achieve the basic social objectives and targets of this budget.

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