Welfare and development schemes bear the brunt

It is widely expected that Chief Minister Jagadish Shettar’s maiden budget will contain a strong dose of populism, with an eye on the elections due in a few months. Even the sharp deceleration in tax collections of the government in the current year is unlikely to deter him from using the budget as the last roll of the dice.

The reality is that commercial tax collections of the State government have dipped sharply during 2012-13. In the first nine months of the current year (April-December 2012), commercial tax collections amounted to Rs. 21,212 crore. This was only 8.96 per cent higher than in the comparable period of 2011-12. To put the slowdown in perspective, tax collections in the first nine months of 2011-12 were 21.09 per cent higher than in the previous year. And, a year earlier, in 2010-11, it increased by 31.86 per cent.

Ominously, these figures reveal a decline in pace of growth of tax collections in the last three years. What this means is that the ability of the government to raise resources for its various plans and schemes has been severely hampered. When Mr. Shettar’s predecessor, D.V. Sadananda Gowda, presented the budget last year, he had aimed to raise nearly Rs. 65,000 crore by way of tax revenues, a modest increase of about 14 per cent when compared to the previous year. Given that commercial taxes — of which a significant portion comes from Value Added Tax and other taxes on trade — account for about 60 per cent of overall tax resources, the slowdown is sure to have a significant impact on revenues raised by the government in the current year.

The Opposition, which has in its reaction to the Governor’s address on Monday, attacked the government for its irresponsible and reckless attitude to the State finances, is sure to see this as evidence that the government does not have the wherewithal to implement its promises. The Opposition, led by Leader of the Opposition in the Legislative Assembly Siddaramiah of the Congress and H.D. Revanna of the Janata Dal (Secular), have alleged that the government has not even spent what it had promised on welfare and development schemes in the current year. They have alleged that neither welfare schemes for the disabled and the elderly, nor development schemes such as those for providing drinking water in drought-affected parts of the State and the MNREGA have been implemented adequately.

Unequal burden

It appears that the burden of the fiscal ‘adjustment’ has been disproportionately borne by segments of the population that depend on such schemes. For instance, by the end of December, the Department of Social Welfare had spent less than half its budgeted expenditure.

Although Mr. Yeddyurappa may be tempted to target the government for its inability to raise resources, it may be pertinent to recall that during his tenure as head of the Finance Department, especially early on in his innings (2009-10), tax collections slackened considerably.

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