The perils of populist budgets – The New Indian Express

By any standard, the Telangana Budget for 2021-22 presented in the Assembly by Finance Minister T Harish Rao on Thursday was very ambitious. The size of the Budget was Rs 2.3 lakh crore, with a fiscal deficit of Rs 45,509 crore. Last year, the Budget was Rs 1.8 lakh crore, but that had shrunk to Rs 1.66 lakh crore, what with Covid-19 dealing a mortal blow to the states receipts.

The Budget proposals make it clear that the government still does not want to cut the coat according to the cloth. Each year, even if not for Covid, something else like a sudden slash in Central devolutions would be present. In the present Budget, it is not as though the government was unrestrained. It deferred the unemployment allowance promised to jobless youth. But again, on the flip side, it does not show any allocation for implementation of the Pay Revision Commission recommendations at the rate of 27% fitment, which has to be done anyway since the chief minister had reportedly promised it recently. The additional outgo would likely be about Rs 8,000 crore. This would add to the fiscal deficit, which means more borrowings. The public debt outstanding at the end of 2021-22 is estimated to be a whopping Rs 2.86 lakh crore, a figure that is intimidating. It is about 24.84% of the GSDP. Anything more would break the states back.

No one blames Harish Rao or Chief Minister K Chandrashekar Rao for their overreaching ambition if one looks at the issue through the political prism. As peoples expectations grow each year, the government finds itself compelled to increase allocations. Welfare schemes such as Rythu Bandhu, Aasara, Kalyana Lakshmi and free power supply to farmers drain finances but are big vote catchers. Once announced, welfare schemes stay forever. Additional schemes would only mean greater financial profligacy. A beginninghas to be made to channelise revenues going into such schemes towards asset creation instead. For this, the TRS needs to show political courage.

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The perils of populist budgets - The New Indian Express