OWING to demonetisation Goa is staring at a loss of about Rs 800 crore in government revenue. Revenue collection in the current financial year had been witnessing a positive growth till November 8.The trend has reversed: the state is expected to lose between 20 and 25 per cent of the total revenue. Shortage of new currency has led to fall in business in all areas. Sale and purchase have gone down considerably, including in properties. As a result there is going to be a major decline in revenue collection with respect to value added tax, excise duty, stamp duty and registration fee. The officials have now focused their attention not on achieving budget targets but to contain the loss of revenue to below 10 per cent, which could help the state to work towards some sort of economic stability.
Demonetisation had a big impact on retail, tourism and other sectors. The decision came around the time when the tourist season was to begin; the state has witnessed fall in tourist arrivals. Even the tourists who come are not spending much as they cannot waste long hours at bank branches and ATMs are mostly non-functional or delivering useless 2000-rupee notes. As a result of minimal expenditure by tourists the government is losing on VAT, excise duty and other taxes. With the first two months of the tourist season gone without much revenue collection, the state officials as well the hospitality industry are now looking for revival in tourist arrivals during the peak period in end of December and early January. In case tourist arrivals do not look up during this period the economy and state revenue would slide further. With Assembly elections due in the state, tourist arrivals are going to be less in January to March, impacting revenue collection further.
The consumer demand has dipped appreciably. Traders and shopkeepers have reported 30 to 50 per cent drop in their business since demonetization. Much of trade in the state, as in other parts of the country, was conducted in cash, and there was great shortage of cash both with the customers and the traders. Despite fall in prices as a result of poor demand, there were fewer buyers than normally would turn up at the report of dip in prices. The real estate market has witnessed a downswing in demand because of expectations of a 20-30 per cent drop in property prices. As a result, land and built-up properties are not being sold and purchased and registered, causing drop in stamp duty collection.
Chief Minister Laxmikant Parsekar, who is also the state finance minister, says the state has used its earnings in the past to implement various social welfare schemes. Parsekar has also said that the government has been using loans raised from the open market for infrastructure development. A fall in revenue could affect payments under social welfare schemes and repayments of loans. Development of infrastructure is crucial for the economy to grow bigger and generate more employment and income for people. The government must ensure that neither the development process nor the implementation of the social welfare schemes is affected owing to fall in revenue. The government revenue is already under pressure from a fall in income from mining and payment of salaries according to the Seventh Pay Commission to its 60,000 employees. One way could have been additional taxation, but this is an outgoing government and cannot do that.
The Chief Minister is hoping the central government would provide the state funds by way of compensation for the loss of revenue, as it is not only Goa but all states and union territories that have suffered a similar impact. Some states have already approached the central government, with the plea that they fear a 30-40 per cent drop in their revenues. The state government has been trying to improve its revenue by motivating shopkeepers to use point of sale machines. However, they can push them only to an extent; otherwise the campaign can turn counterproductive. In view of revenue drop, the state government might have to cut down on its expenditure. It has put off recruitment of thousands of people in various departments in order to avoid additional salary burden. It has to take innovative steps to generate revenue in order to neutralize the adverse impact of revenue drop and also to avoid borrowing from the open market or the central government. The state has a huge debt to repay already. The state authorities need to adopt prudent economic measures and curtail expenditure. And instead of waiting for the central government to work out a common policy of compensation to all states the state government should revise its projected revenue for the current year and apprise the central government of the state’s financial need.