UP faces challenges on revenue front ahead of state budget

LUCKNOW: The Uttar Pradesh government faces the challenge of increasing, or at least matching, the size of the current financial year’s budget when it presents the budget for 2021-22 the next month. The state legislature’s budget session will begin here on February 16.

The state was able to meet 65.7% of its revenue target for the first three quarters of the current financial year amid the fight against Covid-19, and the lower revenue realisation is bound to reflect on the upcoming state budget.

The state government had presented its largest- ever annual budget of Rs 5,12,860.72 crore in 2020-21, marking an increase of 6.9% against the size of the previous annual budget.

The annual budget for 2020-21 incorporated new schemes for about Rs 10,967.87 crore. Chief minister Yogi Adityanath may like to use this year’s annual budget presentation to make some populist announcements and incorporate some new schemes or projects before the state goes into poll mode for the 2022 assembly elections.

Such new announcements/ schemes may inflate the size of state’s annual budget, despite the resource crunch. It remains to be seen whether the state government will be able to mobilise additional resources to match the demands of the annual budget.

“It is observed that the government strives to keep the size of the budget higher than the previous year’s budget. But the revised and actual estimates turn out to be lower than the budgeted one. For 2019-20, the budget size was Rs 4,79,701.10 crore. But the revised estimates put the budget size for 2019-20 at about Rs 4,51,828 crore, down by about 5.8%. Therefore, for 2021-2022, the budget may also be equal to or slightly higher than the size of 2020-21. But the government will be hard pressed to mobilise resources commensurate with the size of budget,” said Yashvir Tyagi, retired professor of the department of economic, Lucknow University.

The state government had announced measures like increasing the rate of VAT (Value Added Tax) and excise duty to augment revenue following the lifting of restrictions in 2020. Although such measures, coupled with increasing economic activity, have helped in increasing the revenue to some extent, the state’s revenue receipts are still short of the targets despite a consistent increase in the state government’s monthly tax and non-tax revenue. In December 2020, the total collections went up by about Rs 2,522 crore vis-à-vis the revenue realised in the same month in 2019.

In the first three quarters of 2020-21 (April 1, 2020 to December 31, 2021), the total receipts, however, remained behind the targets.

The state government’s total collections in the first three quarters remained at about Rs 80,006.34 crore between April 1, 2020 and December 31, 2020, about 65.7% of the target of Rs 1,21,845.42 crore for the same period.

The state government spends about Rs 12,000 crore per month on payments of salaries, pension and interest to its employees. Its expenditure under the head may go up in 2021-22. As its total collections have failed to meet the expenditure, the state government is likely to go for additional borrowings to meet its expenditure and provide funds for expeditious development. Finance minister Suresh Khanna was not available for comment on the issue.