Ahead of UP budget, Adityanath govt looks to balance populism, development

Even before the dust settled on the 11th edition of DefExpo 2020 in Lucknow, top officials in Uttar Pradesh (UP) were back at the drawing board, ahead of the state’s Budget, to be tabled on February 18.
 
Although the state had signed at the DefExpo 23 memorandums of understanding (MoU), of Rs 50,000 crore, with Indian and foreign companies in the defence manufacturing sector, there was little time to soak in the encomium, because the target of UP becoming a $1-trillion economy by 2024 amid challenging circumstances stares it in its face.
 
In this context, Chief Minister Yogi Adityanath’s fourth Budget will have the tough task of balancing infrastructure and socio-economic development with populism, especially with the state looking at a lower share in the divisible pool of central taxes, according to the 15th Finance Commission recommendations.
 
The economic slowdown has taken a toll on the state’s industrial growth and consequently the collection of taxes, which is further putting a strain on its finances. UP had collected about Rs 80,000 crore in taxes during the first eight months (April-November) of 2019-20, which is 58 per cent of the targeted tax purse of over Rs 1.40 trillion during the current financial year. This had prompted the chief minister to pull up the taxman, and instruct curbing tax evasion.
 
The state is aiming at expanding the registered traders’ pool under the goods and services tax (GST) net from 1.4 million now to 5 million in the near future.
 
At the same time, the state had received only about Rs 56,000 crore, or 36 per cent of the targeted Rs 1.528 trillion, of its share in central taxes during the first six months (April-September) of 2019-20. The state also got less than 20 per cent of the promised central grants of Rs 68,000 crore till September 2019.
 
Mega infrastructure projects, such as the Purvanchal Expressway, the Bundelkhand Expressway, the Ganga Expressway, Jewar International Airport, and Kanpur Metro, which are expected to be commissioned or get underway much before the 2022 UP elections, will need liberal budgetary allocations.
 
On the other hand, social sectors of education, health, women and child development, law and order, etc will simultaneously exert pressure on the ruling Bharatiya Janata Party (BJP) to provide liberal grants lest opposition parties mount onslaught, alleging neglect of people’s issues.
 
However, the fiscal slippage in revenue and expenditure would affect the state’s efforts to accelerate investment and growth.
 
With the Aam Aadmi Party sweeping the Delhi polls on the plank of socio-economic development, the political narrative of mixing populism with social welfare schemes is also seen to encourage ruling parties to rework their Budget maths on the same lines.
 

“Adityanath’s fourth Budget poses myriad challenges to the government. Due to the slowdown, there is a likelihood of the state facing revenue shortfalls, thus necessitating the need for greater resource mobilisation by the state government,” said economist Yashvir Tyagi, a former head of the Lucknow University economics department. He noted the Adityanath government would find it tough to keep its commitments on expenditure, especially on infrastructure projects, in such a scenario.
 
Former UP Planning Commission member Sudhir Panwar said: “Tax collection is likely to be muted in the coming year while the state needs to provide funds for mega infra schemes and other social sector heads, in addition to the religious populism agenda that the current dispensation pursues.”
 
Meanwhile, UP MSME (micro, small, and medium enterprises) and Export Promotion Minister Sidharth Nath Singh said the Budget would provide momentum to the socio-economic and infrastructure development agenda of the Adityanath government.
 
Adityanath, unlike his predecessors, now presides over the quarterly meeting of the State Level Bankers’ Committee, which monitors and regulates the credit flow to various sectors, especially agriculture and MSMEs.
 
According to Reserve Bank of India  Regional Director Lakshmi Kanth Rao, this showed the proactive approach of the state government.