Despite battling revenue deficit of over Rs 4,000 crore, increasing debt-trap and recessionary mode, the Punjab government, mindful of the upcoming three byelections, has managed to repeat its last years budget mantra of No new taxes. Instead, it would be spending Rs 3,000 crore to fulfill part of its promise to the government employees of implementing 5th pay commission by giving them enhanced salaries from next month.

Announcing this during his budget speech in the Punjab assembly on Tuesday, finance minister Manpreet Badal admitted that the increase in revenue deficit over the previous year was mainly on account of provision made for implementation of the pay commission recommendations. Notably, 99% of revenue receipts are going towards committed expenditure which includes salaries, pensions and interest payment.

However, the commissions recommendation on payment of arrears with retrospective effect from January 1, 2006 may be put off till next year as the state would not be able to bear the additional burden of Rs 4,800 crore. The minister said that all the states have asked the Union government to help them out on this front.

Increased borrowings, not taxes or any other fiscal prudence, would be used to cover up the revenue deficit of Rs 4233.92 crore, even as the opposition Congress described the budget document as visionless and directionless. This comes when the government has conveyed to the finance commission that Punjab has reached a stage of debt unsustainability. The debt Gross State Domestic Product (GSDC) ratio has been calculated at 37.63% , which the FM claimed, was better than the previous years figure of 40%.

While admitting that VAT and stamp receipt collections had taken a hit after October 2008, he conceded that the slow growth of GSDP was due to the lack of investment atmosphere in the state. While poor finance has constrained public investment, tax concessions in the neighbouring hill state attracted private investment, he added.

The plan proposals, which mostly hinged around Punjabs share in the Central government schemes, are of the size of Rs 8,625 crore, which is 39% higher than last years approved outlay of Rs 6,210 crore. Maximum thrust, this year, has been given to energy sector at 30%.