Populist moves, growing debts

Rakesh Lohumi

Himachal Chief Minister Virbhadra Singh entering the Assembly to present the budget

The fast-deteriorating financial health of the debt-ridden hill state has not daunted the Congress government from doling out unemployment allowance to educated jobless youth in the election year budget. Assembly election is due in Himachal Pradesh in December and the Congress, which has been ousted from many states, is desperately looking to retain power at all costs.
The announcement has stumped the BJP as it was the Leader of Opposition Prem Kumar Dhumal who made it a big issue and tried to corner the ruling Congress by accusing it of not fulfilling the promise made by it in the election manifesto. Some senior Congress leaders opposed to Chief Minister Virbhadra Singh also raised the issue to embarrass their own government.
With just nine months to go for assembly election the Congress is desperate to retain power in the state and not been hesitating a wee bit in taking imprudent decisions that would have grave implications for the financial health of the state in the long run.
As per the budget proposals for the year 2017-18 educated youth who have passed at least ten plus two will be entitled to an unemployment allowance of Rs 1000 per month and in case of physically challenged youth the amount will be Rs 1500.
A provision of Rs 150 crore has been made in the budget for the purpose. It is obvious that the outgo will be much higher and the burden will increase progressively as the state has over 8.5 lakh unemployed on the live registers and several thousand are added every year.

Earlier, in January the government declared Dharamsala as the second capital of the state without any demand. There is no justification for a small state like Himachal with a population of just 70 lakh to have two capitals. The decision to win the support of people of Kangra region is totally out of sync with policy of egovernance being pursued in the country.
The government has invested huge funds for creating IT infrastructure along with a surfeit of Internet-based applications for various public services which the citizens can access from anywhere with a click of mouse.
Whether or not these political decisions to woo the electorate will help the Congress to win the election will be known later this year but one thing is certain that it will further strain the already stretched state exchequer.
The revenue deficit has been increasing due to the inability of successive political regimes to take harsh decisions to downsize the heavy administrative set up with highest paid employees in the country and mobilise resources.
The state has been resorting to borrowings to bridge the deficit. In the current financial year borrowing amounted to 19.40 per cent of the budget and the percentage will go up further to 22.55 with fresh loans of Rs 7,345.55 crore to be raised in 2017-18.The total outstanding loan will touch Rs 46,000 crore by March 2018 and as per the projections in the mid-term fiscal policy statement presented with the budget the trend will continue and the total debt will shoot up to Rs 63,049 crore in 2020-21.
The committed expenditure on salaries, pensions and interest liability has been mounting with each passing year but the state's revenue has not been keeping pace with it. The annual outgo on account of salaries which stood at Rs 6,146 crore in 2012-13, will increase to Rs 9,628 crore by 2017-18 and further to Rs 14,642 crore in 2020-21.

Similarly, the pension burden will more than double from Rs 2,494 crore to 4950 crore and further to Rs 6,608 crore, while the interest liability will swell from Rs 2297 crore to 3,500 crore and reach. Rs 4,457 crore by 2020-21. With loan repayments of Rs 3553 crore, Rs 2311 crore for maintenance and Rs 1037 crore going towards subsidies, over 80 per cent of the budget will be spent on committed liabilities. Only about 18 to 20 percent funds will be actually left for development works in a budget of 35,783 crore.

The revenue deficit has been increasing due to the inability of successive political regimes to take harsh decisions to downsize the heavy administrative setup with highest paid employees in the country and mobilise resources.

The situation will worsen progressively as revenue receipts are projected to increase at much lower pace from Rs 26,676 crore in 2016- 17 to Rs 37,038 crore in 2020-21 than the expenditure which will rise from Rs 27,613 crore to Rs 42,252 crore over the same period. Thus, revenue deficit will increase from 3.51 per cent to 14.07 per cent and the percentage of revenue deficit will increase from 3.51 per cent in 2016- 17 to 3.76 per cent in 2017-18. The entire fiscal restructuring exercise under the World Bank Funded initiative to reduce the debt burden and bring down the fiscal deficit as percentage of Gross State Domestic Product (GSDP) growth down to 3 per cent has gone in vain. The percentage of fiscal deficit to GSDP growth has also been projected at 4.99 in 2020-21 as compared to 3.50 per cent at present, while the percentage of tax revenue will decline from 5.79 to 5.30.

The only silver lining in the otherwise gloomy state of finances is that the Gross State Domestic Product (GSDP) has grown at a robust rate of 7.4 per cent from Rs 82,820 crore in 2012-13 to Rs 1,13,667 crore in 2015-16 and projected at Rs 1,24,570 crore in 2016-17. It is projected to reach Rs 2,06,727 crore in 2020-21 and the percentage of debt to GSDP growth will be 30.55 per cent.
The government has been in the election mode for the last one year and taking one populist decision after the other to woo the electorate. It enacted a legislation to regularise all the illegal structures in the state on "as is where is basis" to reward the builder mafia, virtually mocking at the lawabiding citizens.
Only last month it came out with an interim policy to provide relief to those who have encroached up to five bighas of government land, including forest area, knowing full well that under Forest Conservation Act forest land cannot put to nonforestry use without the prior permission of the Centre.
The Opposition BJP is equally to be blamed as it has been raising such illegal and unreasonable demands to consolidate its vote bank. A past master in political games Chief Minister Virbhadra Singh has been blunting the criticism of his government by implementing all the populist agenda being dictated by the BJP.
Good governance and financial health of the state have been the main casualty in the competitive populism being pursued by the two principal political parties in the state.



		EDITOR'S MAIL MATTERS OF PUBLIC POLICY MARCH OF AYODHYA INDIAN PRESIDENCY REALPOLITIK FOR CREDIBLE OPPOSITION A GAME CHANGER DEFENCE MODERNISATION STATE OF EDUCATION DELHI MCD POLLS FRANKLY SPEAKING SACRILEGE IN PUNJAB KASHMIR WATCH CRIMES AGAINST WOMEN POLL-YEAR HIMACHAL KERALA UNDER LDF CHANDIGARH DIARY U.S. FOREIGN POLICY AMERICAN DIARY JADAV ISSUE INDO-BANGLADESH TIES CIVIL AVIATION HITS & MISSES TEST CRICKET SPORTS BOOK BAZAAR SIGNS OF THE TIMES MIGRATION & WOMEN'S RIGHTS YOGA IN DAILY LIFE-XIII ART OF LIVING Issue:May' 2017 Subscribe Now	POLL-YEAR HIMACHAL Populist moves, growing debts Rakesh Lohumi Himachal Chief Minister Virbhadra Singh entering the Assembly to present the budget The fast-deteriorating financial health of the debt-ridden hill state has not daunted the Congress government from doling out unemployment allowance to educated jobless youth in the election year budget. Assembly election is due in Himachal Pradesh in December and the Congress, which has been ousted from many states, is desperately looking to retain power at all costs. The announcement has stumped the BJP as it was the Leader of Opposition Prem Kumar Dhumal who made it a big issue and tried to corner the ruling Congress by accusing it of not fulfilling the promise made by it in the election manifesto. Some senior Congress leaders opposed to Chief Minister Virbhadra Singh also raised the issue to embarrass their own government. With just nine months to go for assembly election the Congress is desperate to retain power in the state and not been hesitating a wee bit in taking imprudent decisions that would have grave implications for the financial health of the state in the long run. As per the budget proposals for the year 2017-18 educated youth who have passed at least ten plus two will be entitled to an unemployment allowance of Rs 1000 per month and in case of physically challenged youth the amount will be Rs 1500. A provision of Rs 150 crore has been made in the budget for the purpose. It is obvious that the outgo will be much higher and the burden will increase progressively as the state has over 8.5 lakh unemployed on the live registers and several thousand are added every year. Earlier, in January the government declared Dharamsala as the second capital of the state without any demand. There is no justification for a small state like Himachal with a population of just 70 lakh to have two capitals. The decision to win the support of people of Kangra region is totally out of sync with policy of egovernance being pursued in the country. The government has invested huge funds for creating IT infrastructure along with a surfeit of Internet-based applications for various public services which the citizens can access from anywhere with a click of mouse. Whether or not these political decisions to woo the electorate will help the Congress to win the election will be known later this year but one thing is certain that it will further strain the already stretched state exchequer. The revenue deficit has been increasing due to the inability of successive political regimes to take harsh decisions to downsize the heavy administrative set up with highest paid employees in the country and mobilise resources. The state has been resorting to borrowings to bridge the deficit. In the current financial year borrowing amounted to 19.40 per cent of the budget and the percentage will go up further to 22.55 with fresh loans of Rs 7,345.55 crore to be raised in 2017-18.The total outstanding loan will touch Rs 46,000 crore by March 2018 and as per the projections in the mid-term fiscal policy statement presented with the budget the trend will continue and the total debt will shoot up to Rs 63,049 crore in 2020-21. The committed expenditure on salaries, pensions and interest liability has been mounting with each passing year but the state's revenue has not been keeping pace with it. The annual outgo on account of salaries which stood at Rs 6,146 crore in 2012-13, will increase to Rs 9,628 crore by 2017-18 and further to Rs 14,642 crore in 2020-21. Similarly, the pension burden will more than double from Rs 2,494 crore to 4950 crore and further to Rs 6,608 crore, while the interest liability will swell from Rs 2297 crore to 3,500 crore and reach. Rs 4,457 crore by 2020-21. With loan repayments of Rs 3553 crore, Rs 2311 crore for maintenance and Rs 1037 crore going towards subsidies, over 80 per cent of the budget will be spent on committed liabilities. Only about 18 to 20 percent funds will be actually left for development works in a budget of 35,783 crore. The revenue deficit has been increasing due to the inability of successive political regimes to take harsh decisions to downsize the heavy administrative setup with highest paid employees in the country and mobilise resources. The situation will worsen progressively as revenue receipts are projected to increase at much lower pace from Rs 26,676 crore in 2016- 17 to Rs 37,038 crore in 2020-21 than the expenditure which will rise from Rs 27,613 crore to Rs 42,252 crore over the same period. Thus, revenue deficit will increase from 3.51 per cent to 14.07 per cent and the percentage of revenue deficit will increase from 3.51 per cent in 2016- 17 to 3.76 per cent in 2017-18. The entire fiscal restructuring exercise under the World Bank Funded initiative to reduce the debt burden and bring down the fiscal deficit as percentage of Gross State Domestic Product (GSDP) growth down to 3 per cent has gone in vain. The percentage of fiscal deficit to GSDP growth has also been projected at 4.99 in 2020-21 as compared to 3.50 per cent at present, while the percentage of tax revenue will decline from 5.79 to 5.30. The only silver lining in the otherwise gloomy state of finances is that the Gross State Domestic Product (GSDP) has grown at a robust rate of 7.4 per cent from Rs 82,820 crore in 2012-13 to Rs 1,13,667 crore in 2015-16 and projected at Rs 1,24,570 crore in 2016-17. It is projected to reach Rs 2,06,727 crore in 2020-21 and the percentage of debt to GSDP growth will be 30.55 per cent. The government has been in the election mode for the last one year and taking one populist decision after the other to woo the electorate. It enacted a legislation to regularise all the illegal structures in the state on "as is where is basis" to reward the builder mafia, virtually mocking at the lawabiding citizens. Only last month it came out with an interim policy to provide relief to those who have encroached up to five bighas of government land, including forest area, knowing full well that under Forest Conservation Act forest land cannot put to nonforestry use without the prior permission of the Centre. The Opposition BJP is equally to be blamed as it has been raising such illegal and unreasonable demands to consolidate its vote bank. A past master in political games Chief Minister Virbhadra Singh has been blunting the criticism of his government by implementing all the populist agenda being dictated by the BJP. Good governance and financial health of the state have been the main casualty in the competitive populism being pursued by the two principal political parties in the state.