The post-demonetisation resource crunch is likely to push the State to an inevitable cut in Plan expenditure soon.
The steep fall in the State’s own tax revenue would give little leeway for the government to manage the available resources at its command and there would be a compulsion to either prioritise or squeeze the expenditure or go in for a declared cut in the State Plan pegged at Rs. 20,500 crore.
If the lingering crisis is an indication, a 35 per cent cut in expenditure would become imperative. But no official decision has been made on this score so far.
Finance Department sources told The Hindu that an earnest endeavour is being made to avert such a situation, but the deepening crisis would force the government to explore such options too.
Tax collection is likely to plummet from the 16.7 per cent registered in October. The resources that are being mopped up by the tax personnel in November are the outcome of the pre-demonetisation sales.
But for a drastic change, the government expects the fiscal situation to be too grim in the remaining months of the current financial year.
The crisis that has had its impact on the retail market, plantation, registration, construction and other sectors would reflect only in the next five months.
It has almost become sure that the government target to achieve 19 per cent collection during the last quarter would not be possible.
And that would eventually upset all the budget calculations set to even out the fiscal position of the State, sources said.
Current indications do not offer much hope for an immediate turnaround. The crisis seems to be deepening.
Soon the government would have to take a call on the situation and direct the departments to review their Plan proposals and defer some of them to tide over the crisis.
The cut would also have its impact on devolution of funds to local governments.
Development initiatives would have to be either shelved or deferred.
Most of the Plan projects taken up by local governments have been stalled since they were unable to secure payments from the State treasury.
This situation would only worsen if the government opts for a Plan cut, sources said.
