Mop up for loan waiver, 7th pay spend key hurdles to Yogi's maiden budget

These two expenditures alone add up to Rs 70,000 cr; GST could provide some relief

After a chequered period of first 100 days in office, the incumbent Yogi Adityanath government in Uttar Pradesh is set to table its maiden Budget in the state assembly on Tuesday.

Recently, during a public programme, Yogi said UP needed a budget of almost Rs 10,00,000 crore rather than just Rs 4,00,000 crore for composite development.

Last year, the UP Annual Budget 2016-17 presented by former chief minister Akhilesh Yadav was to the tune of Rs 3,46,935 crore. Its size was 14.60 per cent bigger than the Annual Budget for 2015-16 of Rs 3,02,687 crore.

On December 12, Yadav, in view of the impending UP election, had presented an interim budget for 2017-18 that pegged the budget at Rs 3,63,744 crore. It included Rs 2,87,566 crore of revenue expenditure, which always forms the bulk of the Budget apart from capital expenditure and other heads viz. Rs 21,905 in interest payment etc.

However, the Akhilesh government had sought ‘vote on account’ of Rs 1,34,845 crore for the first five months (April-August) of 2017-18 to provide adequate funds to the new dispensation coming to power after 2017 UP poll.

Meanwhile, the UP budget session is expected to have about a dozen sittings between July 11 and July 28. This would be the second sitting of the state assembly this calendar. The previous assembly sitting was held during May 15-19, when the State Goods and Services Tax (GST) Bill was passed.

Challenges for Yogi

The main challenge for the Yogi government would be to mop up adequate funds towards the crop loan waiver scheme of over Rs 36,000 crore and the additional outgo to meet the expenses for implementing the 7th Pay Commission recommendations for the government employees and pensioners. These two expenditures alone add up to over Rs 70,000 crore.

Besides, there are several other sundry expenditures which need to be provided with funds, including other flagship schemes of the ruling Bharatiya Janata Party (BJP) government.

In the backdrop of the fiscal prudence of requiring the respective states to keep their fiscal deficit under 3 per cent, it would be a tightrope walk for the dispensation to manage its finances within its resources.

However, UP could take heart from the fact that its tax kitty is projected to burgeon with the Goods and Services Tax (GST). The state is likely to see its tax revenue rise by about 15 per cent, since it is basically a consumer state and GST is a destination based tax structure.