Yogi Adityanath needs fiscal prudence to deliver pre-poll promises

With mercury levels already past 40 degrees Celsius, Uttar Pradesh Chief Minister Yogi Adityanath has also started feeling the heat of the high expectations of people, especially with his government completing 50 days in office.

Adityanath has announced a crop loan waiver, as promised by the ruling  Bharatiya Janata Party (BJP) in its ‘Lok Kalyan Sankalp Patra-2017’ to the tune of over Rs 36,000 crore, besides ‘Power for All’ encompassing the 24x7 power to all households in next two years. This would need another Rs 36,000 crore.

Then, there are other pre-poll promises, which need fat funds allocation to fructify. All these factors would require deft planning and fiscal prudence on part of the Yogi dispensation, especially in the face of the tight financial position of UP.

Major pre-poll promises of BJP     

• Crop loan waiver (announced by cabinet)
• ‘Power for All’ (documents signed with Centre)
• Free laptop
• Free girls education
• Enhanced widow pension
• Farmers insurance
• Insurance to unorganised sector workers
• Recruitment of 1,50,000 vacant police posts
• 10 new international level universities

“It is difficult, but not impossible. It would need a concerted effect and meticulous planning. The government needs political resolve and a good team of officers, working in close coordination to fulfil the agenda set out by the government,” former UP chief secretary and former UP finance commission chairman Atul Kumar Gupta told Business Standard.

Considering the current year’s Budget, the total receipts during the 2017-18 fiscal in UP has been projected at Rs 3,56,679 crore, including tax revenue component of Rs 2,21,235 crore, against the total expenditure of Rs 3,63,744 crore. These projections were prepared by the previous Akhilesh Yadav government last year.

UP fiscal health

The fiscal deficit under the Akhilesh Yadav government had witnessed a rising trend. This was partly because his regime had splurged liberally in fulfilling the flagship projects and schemes, without much support from the private sector participation.

For example, the Agra-Lucknow Expressway was entirely funded out of the state coffers with the private sector not investing a penny. Besides, there were other schemes, including Kanya Vidya Dhan Yojana, free laptop scheme, unemployment dole, pension schemes etc, which mounted further financial strain on the exchequer.

In fact, the state fiscal deficit had almost doubled during the five-year rule (2012-2017) of the Samajwadi Party (SP) dispensation from 2.64 in 2012-13 to 4.45 per cent (revised estimates) in 2016-17.

Fiscal deficit under Mayawati (2007-12) had witnessed a downward trend after rising for the first two years of her regime. A plausible reason could be greater participation by the private sector in the various projects, for example, Yamuna Expressway. 

Fiscal roadblocks before Yogi

The 7th Pay Commission had already inflated the annual salary and pension bill of the state by over 12 per cent. It is estimated, this would require an additional amount of about Rs 28,000 crore on implementing the 7th Pay Commission recommendations, including Rs 18,000 crore towards salaries and pension and Rs 10,000 crore to clear arrears in 2017-18.

The state government has to support an estimated 16.52 lakh government employees and 10.50 lakh pensioners’ families.

The previous Akhilesh Yadav government had presented an interim budget on December 21, 2016, provisioning funds for the first five months (April-August 2017) of the current fiscal in view of then impending UP poll.

As per the interim budget, the total size of Annual Budget 2017-18 is pegged at Rs 3,63,744 crore against Rs 3,46,934 crore for 2016. The current budget included Rs 2,87,566 crore of revenue expenditure, which forms the bulk of the budget apart from capital expenditure and under other heads viz. Rs 21,905 in interest payment etc.

Since elections were due in the early months of 2017, the Akhilesh government had sought ‘vote on account’ of Rs 1,34,845 crore for the first five months (Apr-Aug) of 2016-17 to provide funds until a new government is formed.

A senior Finance Ministry official on condition of anonymity said the government had already asked the respective department heads to identify the ruling party’s pre-poll promises relevant to their department. A document has been circulated to all the additional chief secretaries, principal secretaries and secretaries of the respective department in this regard, he added.

‘Advantage Yogi’ factors

• GST
• Normal monsoon
• BJP ruling both at Centre and state
• Modi-Yogi synergy
• Plugging leakages in government spending
• Encourage public-private partnership (PPP)
• Dividing expenditure to multiple financial years
• Curb duplicity of government schemes