Last month, the Trinamool Congress called a 12 hour-bandh to protest against the plethora of taxes lately imposed by the state government and its alleged move to bring cattle, domestic animals and rural transport into the tax-net. The Democratic Youth Federation of India, the youth wing of the Communist Party of India (Marxist), retaliated by staging a huge rally at the Brigade Parade Ground to counter the allegations. Both had one objective — to demonstrate their prowess and court the electorate on the eve of the parliamentary polls. Amid the slogans, the state’s fiscal health was forgotten.
It has been customary to blame the burgeoning non-plan expenditure due to payscale revision for the present situation. There is considerable truth in this, although few are aware of its genesis. The Left Front’s populism, together with its policy of confrontation in its early years, has contributed to the massive imbalance in state accounts. The annual wage bill would not have assumed such staggering proportions (Rs 13,000 crore) had the then finance minister heeded the advice of the bureaucracy that dearness allowance at the Central rate should not be extended to the non-government sector till resources looked up. Then there were the widow allowance, unemployment allowance and so on.
The finance minister’s elaborate revenue plans led to frequent confrontations with the Centre. In his long missives to the planning commission, the minister insisted that the Centre let the state know about the proposed investment before it could commence its five-year plan. But little care was taken to match plan with resources.
The sixth plan was even worse. The per capita plan expenditure in West Bengal was Rs 1,348 while it was more than Rs 2,000 in Maharashtra, Gujarat, Karnataka, Orissa and Rajasthan. The state later borrowed from a private financial institution to pay its employees. So much for its “alternative economic policy”.
There is no doubt that wages and pension consume a major slice of the state’s resources — 78 per cent in 1990-91 to 86 per cent in 1998-99. But the government’s record in resource-mobilization in conformity with the rising expenditure is bad. The annual rate of growth of revenue has been a little over 11 per cent in Bengal, less than even Bihar’s 11.8 per cent. The government’s revenue receipts could hardly account for 36 per cent of the revenue expenditure. The tax-net state domestic product ratio is also on the decline-from 6.46 per cent to 6.04 per cent.
Typically, there is a yawning gap of Rs 2,000 crore in revenue receipts between the budget and the revised figures for 2002-03. This is due to the shortfall in the state’s own tax and non-tax revenues, notwithstanding full receipt of its share of the Central taxes and grants-in-aid from the Centre. The state has already been warned by the planning commission for borrowing heavily from state providend funds and loans against small savings to meet its expenditure under the ninth plan. The interest liability as percentage of revenue receipts was to the tune of 37.6 per cent in 1999-2000. It will be interesting to note how much of the targeted Rs 400 crore the government will be able to save, given its jumbo cabinet and perquisites for ministers.
Resource-mobilization has never been the strong point of the Left Front. In its anxiety to be people-friendly, unrealizable targets and unrealized tax arrears have landed the government in a debt trap. The World Bank, Asian Development Bank and foreign private and institutional investors —once considered untouchables — are now not only welcome but are also being wooed to fill the coffers.
If Bengal is to rise above the mess, there should be no more mud-slinging or mass-pleasing rhetoric to score political victories. A beginning can be made by circulating a white paper detailing the medium-term measures for improving fiscal health. The government will stand to benefit from a public debate on the white paper.