A week apart from each other, the Central and the Goa Budgets have different fiscal stories to tell. One thing that runs common in both is their static nature.
Apart from a few tinkering, taxes and social scheme spendings have been left untouched by finance ministers of both governments.
Constrained by the inability to splurge any more on social programmes or raise taxes, Finance Minister Nirmala Sitharaman seems to have taken a call to tom-tom about the social schemes of her government and how they are on track to meet them.
She did this even as she enumerated the capital expenditure undertaken by the government -- a hard choice when the general election is round the corner.
This approach, however, scores high on fiscal prudence. In fact, lead economist Mridula Goel of BITS-Pillani, Goa believes it is strategically and ethically a sound economic move that fulfils the long-term growth through infrastructure development, along with short-term growth, by investing in social schemes.
The only weakness one spots in the Central Budget is the absence of measures to curb inflation. Sitharaman assured it was within the band of between 2 per cent and 6 per cent prescribed by the Reserve Bank of India (RBI).
The reason she may not have revealed the exact inflation figure could be because it is closer to the higher end of the RBI’s prescribed band.
The central bank in its monetary policy, presented recently, stated headline inflation, after easing to 4.9 per cent in October, had climbed to 5.7 per cent due to food inflation, mostly vegetables, in December last year. Anything over 7 per cent could take us on a dangerous inflationary path.
Significantly, there are all signs of inflation spiralling out of control if the government were to fiscally slip.
The government’s spending on social schemes will put money in the hands of people that will find its way into the economy while spends on infrastructure development may not immediately result in a rise in production.
So, there could be a situation where production rise may not match the investment expenditure. This could put pressure on inflation from the supply side.
Another giveaway sign of the dangers of inflation is the unwillingness of the central bank to cut repo rates to push economic growth. A high repo rate injects liquidity into the system.
With several government schemes operational at the moment, the Centre is desperate for liquidity to deliver on them and keep them running. If they were to infuse more liquidity, it may further drive up inflation.
That’s the point at which the Central Budget connects with State Budget. With the government, apparently, short of funds, their disbursement to the State may remain low. That is what is visible in the State Budget.
In the current fiscal, it received a special financial assistance of Rs 750 crore from the Centre and is expected to get Rs 1,506 crore in the next fiscal. This is low considering its contribution to the Centre.
Apart from this, Goa is on a much firmer terrain with projection of revenue surplus of Rs 1,720 crore and per capita income of Rs 7.64 lakh in 2024-25. The gross state domestic product (GSDP) this fiscal grew to Rs 1.06 lakh crore at 13.73 per cent, albeit on a lower base.
This is expected to increase by 13.87 per cent to Rs 1.21 lakh crore next fiscal.
The State Budget has also restrained from levying additional taxes and continued with its social inclusion schemes. Since, it is revenue surplus it has more fiscal room to spend than the Centre.
Remarkably, there seemed to be no explicit mention of the economic impact of extensive infrastructure development in the State.