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For years, West Bengal lagged in improving its tax revenue vis-a-vis gross state domestic product (GSDP).
Amit Mitra, Finance Minister in the Mamata Banerjee Government, now claims to have reversed the trend by improving State tax revenues by Rs 11,000 crore (over 50 per cent) in a span of a little less than two years.
But, what Mitra clearly forgot to mention in his budget speech on Monday is that the dramatic improvement in collections had little impact on the revenue gap.
Having ended with a negative (revenue) balance of Rs 14,571 crore in 2011-12, Mitra promised to bridge the gap to Rs 6,976 crore in 2012-13. In the revised estimates, Mitra managed to close the gap by a mere Rs 1,263 crore to Rs 13,308 crore.
The Finance Minister may point his finger to lower tax devolution from the Centre owing to the downturn for the lower growth in revenue receipts of Rs 72,054 crore against the original estimates of Rs 76,743 crore in 2012-13.
But, his argument is not foolproof. During the fiscal, Bengal’s revenue expenditure surpassed the initial estimate by Rs 1,643 crore, indicating that bulk of the tax earnings were spent on meeting the Government’s popular agenda.
In his support, Mitra is claiming to have improved the State’s tax-GSDP ratio to “over 5 per cent”. But it is not known if that improvement has brought about any change in West Bengal’s infamous record of posting the lowest tax-GSDP ratio (among all major States) in the country.
The bigger question, however, is whether Mitra would be able to reach the ambitious 22 per cent higher revenue receipt target of Rs 88,403 crore in 2013-14. He is expecting the State’s own tax revenues to go up by approximately Rs 7,000 crore and the rest to be sourced through devolution of Central taxes.
Considering the economic slowdown, one may argue that Mitra is over-ambitious in setting his fiscal targets, that too for a State that doesn’t have a wide tax base and is devoid of much economic activity.
An even bigger concern is that Mitra is not showing any intention of cutting down expenditure. The revenue expenditure target is set 7.6 per cent higher for 2013-14.
With elections round the corner, Rs 180 crore is now on offer to unemployed youth. Another Rs 750 crore is to be doled out to girls from economically weaker sections (Kanyashree). More job recruitments are also on the cards.
The indications are clear. With rising expenditure, any slip in revenue target may have a negative impact on State finances.
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