Former State Finance Ministerís Critique of the State Budget 2014

Former State Finance Minister Dr. Asim Dasgupta has placed a critique of the 2014 Budget of the state of West Bengal, in a press conference on the 18th of February. The critique focuses on 6 major sectors namely taxation, production, employment, public health, the State Government’s loan burden, and the Chit fund scandal. 

1 ) Taxation

It is noted that the state govt plans to continue collecting “entry tax” at every panchayat and municipality level, inspite of the High Court ruling against such taxation as unconstitutional and illegal. Though the govt has appealed against the ruling, the higher court has not issued any stay order on the ruling of the previous Judge. A further objection has been raised about how the “entry tax” collected at the Panchayat or Municipality level does not deduct the tax at the previous (higher) level, unlike the policy followed with VAT, meaning that the cumulative load of the “entry tax” will be much higher.  Not only is the tax unconstitutional, there are widespread reports of it being used to harass common traders. Moreover, contrary to the hype, the state govt can only increase the state treasury by 20% this year (inclusive of the entry tax), and 15% the next year, whereas in the 2010-11 financial year the recorded increase was 25%. 

2) Production

The government claims that in the present financial year (2013-2014) gross production in the state will increase by 7.7%, and it is shown that this is a result of 9.58% increase in industrial production in the state. This claim comes at a time when the national average increase in industrial production has come down to a low of 0.7% due to the recession. Now, it is a matter of common sense that industrial production is directly linked to actualized investment in industry. This actualized investment has dipped from 15,052 crores in 322 new industries in 2010-11, to 312 crores in 12 new industries in 2012-2013, according to article 6.6 of the economic survey published by this very government in the respective years. This year mysteriously, the article number 6.6 has been replaced by an article 6.2 which fails to deliver any statistics about how many projects have actually been realized and are contributing to industrial production, because it clumps together the completed and incomplete projects. This occludes any derivation of industrial production from hard facts, and casts a curtain over how the government arrived at the figure 9.58%. 

3) Employment opportunity

The government claims that  13 lakh jobs will be created this year. It also states that 43 thousand teachers, and staff of the home ministry have already been recruited. Now, whenever the government recruits new employees, its budget allocation for salaries must increase. Contrary to this, the budget allocation for salaries has gone down from 32,773 crores to 30,322 crores, implying that there has been job shrinkage instead of growth. 

Moreover, by the government’s own admission, the self-help groups which generated plenty of employment opportunities has gone down from over 10 lakhs in 2011 to 6.8 lakhs this year.

Surprisingly, the booklet summarizing all current financial statistics and containing official information about organized and unorganized industry and the service sector, which used to be published regularly till last year, has not been published by the government this year. Neither was it placed along with the budget speech. This lack of transparency has raised several important questions.

4) Public Health 

The budget also announces that the government has established many health centres in the last 2 years. However, the information available from the Indian government shows that mortality rates have increased in West Bengal in the previous 2 years, the total death rate from 6.0 in 2010 to 6.2 in 2012, and the child mortality rate (an indicator which is more sensitive to improvement in care standards) has increased from 31 (per 1000 in 2010) to 32 (per 1000 in 2012). So the Government’s claim that health care facilities are being set up is being contradicted by the health care outcome statistics which show that death rates are going up.

5) The State’s burden of debt

On the 31st of March, 2011, West Bengal had a total debt of 1.87 lakh crores – it stood 3rd among all the states in terms of total loan, and 13th in terms of per capita debt. Now, of this 79 thousand crores was from the small-scale savings (the post-office savings scheme which the central government compulsorily places on the state), and 12 thousand crores was related to central government programmes. About 67 thousand was loaned from the market. In the year 2010-2011 the State government loaned only 9500 crores from the market out of a total 12500 crores that was permitted, and WB stood 6th in terms of total loaned amount.

After the 2011 elections the TMC government came to power it loaned 17500 crores from the market in its first year, and WB stood 1st in terms of largest total loaned amount. The total loaned amount has since then persistently increased first to 2.08 lakh crores in 2011-2012, then 2.26 lakh crores (2012-2013).  At the end of this financial year the total loan will cross the government’s projected sum of 2.47 lakh crores, and may touch 2.5 lakh crores. At the end of the 2014-2015 year it will cross 2.75 lakh crores. 

Moreover, due to the consistent movements of the Left, the rate of interest on loans compulsorily thrust upon the states by the centre which are related to small-scale savings and central programmes has gone down from 2011, and the deadlines for payment have been pushed back 20 years. The current government while reaping the advantage of these changes continues to lie to the people that the previous LF govt is to blame for the large debt. Ironically, the present government’s continually escalating loan from the market  is becoming a matter of great alarm. 

6) Chit-funds

This budget is comfortably numb to the huge impact of the Sarada scam on 20 lakh families in Bengal. It just mentions out of context that 4 lakh families have been compensated. The government has ignored the precedent set by the previous government and the order of the High Court by not implementing the sale of Sarada group property to compensate the affected people. Instead without any law to support its actions it has given this compensation from the pockets of taxpayers. 

These questions have been raised about the State Budget, its lack of transparency and misinformation, the non-publication of the financial statistics. No answers have come. The people of West Bengal, and the student community especially, will not rest till the Government delivers the answers. 

22nd February, 2014