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Patto Plaza Goa’s business hub; (Inset) Chief Minister Manohar Parrikar, presenting Goa budget 2019-20

Beyond the text of the Goa Budget 2019-20

By Manoj S. Kamat*


The analysis of budget for any economy is to be made from the budget documents rather than the budget speech read by the concerned finance minister. The so called ‘Budget’ is much more than a budget speech as it comprises of numerous documents, that include the text of the speech, Figures at Glance, Budget in Brief, the Annual Financial Statements (AFS), the Demand for Grants,  Estimates of Receipts,  Tax proposals etc.

Like for instance the latest Goa Budget 2019-20. The entire budget document runs in around 1000 pages which include the budget speech in abridged form, curtailed in five pages only. The Budget (figures) at a Glance is again a five page document and gives a snapshot of the revenue receipts, capital receipts,  revenue expenditure, capital expenditure and the difference between the  two classified as overall (total) deficit.

The AFS is of 21 pages. It gives the detailed account of the revenue, capital, contingency and the public accounts. The demand for grants is presented in three volumes with volume I (106 pages) containing the summary figures of demands under the major heads, Vol II (435 pages) the figures on sub-major, minor and the detailed heads of expenditures while Vol III (94 pages) lists the figures under the detailed heads of expenditures. Finally, the Estimates of Receipts (124 pages) shows the accounts of the estimated receipts for all demands ranging demand number 1 through 86, and B1 to B6.

It also goes without saying that budget must always be read against the background of the Economic Survey (ES). The economic survey for Goa is presented by the department of planning and statistics and usually made available before the budget presentation. This document presents the detailed report card of economic and fiscal activities of the government and indicates as to how the economy has fared in the preceding year. Goa’s Economic Survey for the current year 201819 runs in to 187 pages. This means to say that any analysis or interpretation of the budget would entail a brief skimming of the entire set of budget documents rather than the budget speech alone.


State in dire situation

The budget 2019-20 expects the economy to grow at an amazing rate of 10 per cent compared to the last year. But the figures defy logic. Note that the economic growth has drastically shrunk in the current year compared to the preceding year. The Survey admits that the growth rate in the year 2017-18 has decreased by half to around 6.2 per cent (quick estimate) from 12.5 per cent (based on provisional estimate) in the year 2016-17.

The revenue receipts in 2018-19 grew 10 per cent whereas revenue expenditure by 12.1 per cent compared to 2017-18. The capital receipts decreased 4.7 per cent and in contrast the capital expenditure increased 12.7 per cent. Given the mismatches in the current year clearly means the economic math of income and expenditure is likely to be disturbed in the ensuing year too. With the estimated public debt likely to be around 14,000 crores till year ending 2019, overall it seems very clear the state will fail to fare well.

The credit off-take in the state has also been miserably poor indicates the unwillingness of the banks to lend resulting in lame economic activity in the state. Given that the benchmark for the banks is to lend at least 40 percent of the deposits, the current lending of 29 percent in comparison means that government has failed miserably to control, manage and supervise the credit lending and addressing the financing woes of local businesses.

The latest figures available on the composition of our GDP sadly denote that the role of the primary and the tertiary (services) sector is drastically decreasing and the contribution of the primary, secondary and the tertiary sector to our economy is around 7, 57 and 35 percentages respectively.


Fiscal management or data management?

This year’s state budget has something very unusual. It is just not understood as to how all the budget estimate (BE) figures for 2018-19 exactly match with the revised estimates (RE) figures making one question whether it is a result of creative accounting?

The BE refers to the original estimates, while RE figures suggest the actual revenue or expenditure for the initial six months and the projected revenue and expenditure for the rest six months. Actual Estimates (AE) are the real numbers and for the year 2018-19 will only be available when the budget for 2020-21 is presented.

A perfect match between the BE and the RE exact to the decimal points, without any qualification or a footnote is absolutely unusual. The RE are expected to be either more or less than the BE, but never the same as no government can exactly spend during the year to what was proposed after the year actually started.

The Union Budget 2017 for the first time had seen the (BE) of India’s corporate tax and income tax revenue receipts exactly matching their corresponding revised estimates. Similarly the Budget for the year 2015-16 presented by Telangana Finance Minister provided exactly same figures for the BE as well as the RE for the financial year 2014-15. In both the cases it was alleged that the figures were massaged to save face.

Goa unfortunately is a third example where the government claimed to be cent accurate in predicting the exact revenue and spend the exact money closest to the decimals of the exact paisa, as per the revised estimates for 2018-19.


Unrealistic expectation

The government expects a 10 per cent increase in the GDP for the upcoming fiscal year 2019-20 by expecting seven per cent less borrowings and 4 per cent less share of its own taxes in its pie of total revenue. The government plans to do this magic through expected increase of state’s share in central taxes by 10 percent. In terms of expenditure the government expects 4 per cent increase in the salary and wage bill for the upcoming year in its total pie of rupee outgo.

It is heartening to know that the government had expected a surplus of Rs 30.9 crore which actually turned out to be Rs 510 crore in 2017-18. In comparison for the fiscal year 2018-19 the government expects a revenue surplus of only Rs 144. 6 crore. This amount to 3.5 times lower than the previous year due to an expectation of an unprecedented increase in revenue expenditure in 2018-19 and this figures are understandable.

However looking at the 2018-19 trends of lower surplus than expected, it seems to be an over-optimist exercise to predict an increased revenue surplus of Rs 455 crores for the upcoming year 2019-20. The expected surplus is whooping and almost three times more compared to current year when the current year 2018-19 surplus has fallen short of the target by 32 percent compared to the past in 2017-18. This means the government expects the surplus in 2019-20 to increase unprecedentedly compared to what it expected in 2018-19 with an expectation of increase in the revenue receipts in the upcoming year which is not likely.

Similarly the governmental expectation of achieving 45 percent increase in capital receipts (Rs. 2457.4 crore in 2019-20 compared to the RE of last year 2018-19 (Rs. 1700.4 crore) despite 32 percent shortfall (BE) in 2018-19 compared to actual figures in 2017-18, seems to be hollow words in the air.


Role of political aspirations in allocation

From the allocations for various departments it is clearly show that political aspirations of few ministers have been well taken care of. Among various departments, the department of health services received a monumental allocation amounting Rs 774 crores in 2019-20 compared to Rs 521 crores in 2018-19 and for the GMC equating 48 and 10 percent more respectively.

The directorate of higher education received higher allocation close to 20 per cent for the next financial year compared the current year. The IT department received more allocation similar to the higher education. The sports and the social welfare department received 11 percent more while the school education received 10 percent incremental allocation for the next year. Relatively the public works and the agriculture departments received a mere three and five percent increased allocation respectively.

Sadly the department of industries, trade and commerce received a whopping 22 percent less allocation of funds compared to the last year and funds allotted to the tourism department saw a decline of 1.17 percent demonstrating the  apathy of the government to these major sectors of the economy.

The fiscal deficit for the year 2019-20 is expected to be Rs 1418.6 crore as per the new budget. Given that for the passing year the figure is expected to be Rs. 763.6 crore only, means the fiscal deficit for the current year is expected to rise by 85 per cent compared to the last year 2018-19. For the state what is also disturbing is the increase in the overall deficit. The overall deficit has increased Rs 2175 crores in the current year compared to the last year owing to increase in debt burden repayment.

The Chief Minister in his brief budget speech sought a vote on accounts for the first five months of the year assuring that the various schemes, policies including the road map for implementation will be announced in due course of time. While the over-optimism of the government is notable, all eyes are now set as to how the fragile government will make things happen on the future.


*The author is PhD, finance from IIT Bombay and post doctoral fellow in subject of economic policy

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