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Government to spend 75% budget on populist schemes
June, 04th 2012

Will chief minister Akhilesh Yadav's projected 10% growth rate in his maiden budget bring about a transformation in UP? The answer reveals as much as it conceals. Pragmatically, the target of double digit growth seems too far a reality. At least, this is the picture emerging after a review of the budget, which economists have described as "politically sound, but economically inadequate".

Akhilesh represents a generational change. This is reflective of his style and evident by his attempt to blend the old with the new. Given the fact that the budget has been prepared in less than two months of initial hiccups and teething troubles of a new government, Akhilesh can be credited for his fast track initiative.

However, the hinge side of his budget is the preference given to political goals over long-lasting development strategy. The revenue expenditure, also called 'consumption budget' in economic parlance, is projected to be at whopping Rs 1,52,963.61 crore. This roughly works out to be 75% of the total budget expenditure of Rs 2,00,110.61 crore. And if the past trend is any indication, then the revenue expenditure is set to increase in the revised estimate, which is calculated at the end of the financial year.

This implies that more than 75% of the total budget is intended to fund populist schemes like unemployment allowance, saris to poor, laptops/PCs to students and a host of others. The fund incurred this way would be consumed by beneficiaries without any contribution to the net growth in real sense.

Contrary to this, the target is far too less for the capital expenditure, which is the real engine for growth. This is pegged at Rs 47,147 crore, i.e, 23% of the total budget. Capital expenditure goes in a big way to capital generation and asset formations. It increases productivity and also acts as a driver for multifarious economic activities. Thus, the increase in capital expenditure would have helped the state achieve its projected growth rate and create jobs for unemployed, besides increasing the per capita income and providing sustainable long-term development. However, this is missing in the budget and this way, it is not much different from the practice pursued mainly in the post-Mandal era of competitive politics that has thrived largely on castes and other soft options.

Apart from this, the policies announced in the budget are thinly spread. In this context, the most important are power sector reforms, which need to be addressed urgently. The total loss incurred by Uttar Pradesh Power Corporation Limited is over Rs 13,000 crore. This, despite Rs 70,000 crore pumped into it by successive governments in the last 15 years. The tariff revision has been put on hold and there is no indication of any decisive measure in the budget to check power theft, poor recovery of dues and improvement in generation. Likewise, not much is promised to improve the industrial climate and restore the confidence of investors, who are reluctant to choose UP as their destination.

The lopsided priority is another drawback of the budget. For instance, the government has proposed to open 26 new degree colleges, while ignoring to improve the working of existing ones. Most of these colleges are grappling with financial crisis. Similarly, nothing much has been said about the quality improvement in primary schools, where complaints about teachers remaining absent are rampant. This also holds true for the primary health centres (PHC), which often function without doctors, para-medical staff and medicines. This is why these institutions are held poor in public perception and government's statistics also show that only 10% people in rural areas visit these centres for treatment.

UP needs to emulate the Bihar model where chief minister Nitish Kumar has worked assiduously to improve the quality of primary schools and PHCs and made them as one of calling cards of good governance. This has proved rewarding to the people of Bihar as well as for Nitish Kumar, who was voted back to power for second consecutive term.

Most of the schemes announced in UP Budget are of soft nature. There are chances of leakages in their implementation, as this has already been the case with several existing schemes like pension to widows, physically challenged, scholarship to students, etc. Thus, actual beneficiaries are only a fraction of the total targeted population and the result is that the schemes fail to make the requisite impact. However, the budget lacks in measures aimed at correcting the defective delivery mechanism, which is the root cause of distress of people.

While these are the few core issues that demand attention, the single biggest factor responsible for the growth trajectory is the investment ability of government. The budget, which has crossed Rs two crore mark for the first time, is a huge sum to invest. This is set to be passed by the Vidhan Sabha on June 29. However, this will be available for spending only after certain procedural time lag that may take another month, i.e July. And, July-August being the rainy season, not much can be done on ground. So, the spending in accordance to budget allocations can be hoped only from September onwards. This means, the government will have only seven months in hand till the end of current financial year to spend the budgetary allocation. This period seems to be far too short to consume so the budget utilisation will also be a big issue and may adversely affect the state's growth rate.

However, the budget, otherwise, seems to be reasonably sound as far the arithmetic of the economics is concerned. The target set for tax revenue increase and sustaining Rs 51,000 crore plan size is quite achievable in the backdrop of the tax revenue collection of the state, which has shown a growth rate of 21% last year.

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