UP Budget: Yogi govt faces uphill task to bridge deficit

| | Lucknow
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UP Budget: Yogi govt faces uphill task to bridge deficit

Tuesday, 18 February 2020 | PNS | Lucknow

Facing the unenviable task of promises to keep and deficits to bridge, the Yogi Adityanath government will present its fourth budget in the UP Assembly on Tuesday.

Finance Minister Suresh Khanna will present the budget for next fiscal 2020-21.

The UP government in its fourth budget faces the tough task of balancing infrastructure and socio-economic development with populism. The challenge is further compounded from the fact that the 15th Finance Commission is likely to reduce the state’s share in divisible pool of the total revenue of the Centre.

The landslide victory of the Aam Aadmi Party in Delhi on the plank of socio-economic development, freebies and mixing populism with social welfare has also added to the pressure on the UP government as assembly elections are not far away.

The economic slowdown has taken its toll on the state’s industrial growth and consequently collection of taxes which is further putting strains on its finances.

UP 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 target of over Rs 1.40 lakh crore during the current fiscal.  The shortfall has prompted the state government to pull the taxation department and plug tax evasion.

The state government has set a target of expanding the tax base under Goods and Services Tax by enrolling as many as 50 lakh traders in the next few years against the present 14 lakh traders.

The shortfall in collection of its own tax revenue coupled with the drop in state’s share in Central taxes has aggravated the financial situation for the state government. UP, in the first six months of the current fiscal, has received only Rs 56,000 crore or 36 per cent of the target of Rs 1.50 lakh crore. The state also got less than 20 per cent of the promised Central grants of Rs 68,000 crore in first half of the current fiscal.

The UP government faces an uphill task of financing mega infrastructure projects like Purvanchal Expressway, Bundelkhand Expressway, Gorakhpur Link Expressway , Ganga Expressway linking Meerut with Prayagraj, Jewar international airport, Kanpur metro rail project.

Though the Purvanchal Expressway is likely to be opened for traffic by the year end, the government will have to manage finance for other projects to get them going before the 2022 UP assembly elections.

Liberal finance for the social sector is another challenge before the government. The government needs huge money for education, health, women and child welfare and law and order. The government needs finance for this sector to battle the opposition onslaught of ignoring the poor and deprived sections of society. However, the shortfall in revenue and limited option of borrowing from the market gives little leeway. The total debt burden on UP government by the end of March next will cross Rs 5 lakh crore-mark, which is almost likely to be same as the budget size of 2020-21.

The annual burden of debt servicing on UP government is also likely to be over Rs 1.5 lakh crore by the end of 2020-21.

The power sector remains the Achilles heel of the Yogi Adityanath government. In the last three years, nothing much has been achieved for the turnaround of the ailing sector. Despite the bailout package of UDAY (Ujjawala Discom Assurance Yojana) the losses of the UP Power Corporation continue to mount. The state government itself is the biggest defaulter as its departments owe over Rs 15,000 crore to the power utility by the end of March 2019. The power tariff from November 30, 2017 to September 1, 2019 has increased by 27 per cent yet there is no let up in losses of the UPPCL.

The UP government has fixed a target to achieve one trillion dollar economy by 2024 to contribute to the country’s target of five trillion dollar economy.

Official sources said that the budget would be infrastructure-centric, with the government providing funds for the major projects.

“The government however could introduce new measures for additional resource mobilisation,” said an official of the Finance department.

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