By Anjan Roy
Any discussion on a state budget must take into account the current fiscal regime of the country as a whole. For the introduction of the GST system and setting up GST Council meant the states’ giving up their right to tax their main source of revenue, the sales tax. In addition, the centre also gave its right to independently tax one of its biggest tax head —excise duties.
Having taking that into account, one has to factor in the limited time available to the state finance ministers in raising resources. What they can bank upon is the rise in the overall volume of business in the state so that its share from the GST pool originating in the state grows in absolute numbers.
Against this overall fiscal background, the new West Bengal finance minister, Swapan Dasgupta, had to formulate his budget for the year 2026-27 within a very short time available since the new government came into power. As a matter of fact, this is not a full budget. It is a financial statement for expenditure and revenues for a limited period from July till March end next year.
The overarching fiscal fact for the finance minster would have been the massive loan burden on the balance sheet — approximately Rs8.15 lakh crore. The state has little leeway to address the loan burden meaningfully at this point of time. The loan size is equivalent to 40% of the state GDP.
The state finances are effectively caught in what is known as a “debt trap”. That is, it is borrowing to service its debt and interest burden on the loan. Approximately, the state has to repay over Rs1 lakh crore a year to repay a small part of the old debts and interest on the loans. Thus, a good part of its additional borrowing goes into meeting this loan service burden, than spending on meaningful investment to increase the state earning capacity.
What was more alarming was the huge incremental burden of subsidies and doles payments on infructuous heads. Thus, even of the limited funds available, instead of spending on, say, infrastructure creation, funds were squandered on Imam or Priest doles or on grants for Durga Puja clubs. The finances of the state have been honed and ruined which now should be restructured.
However, the finance minster had little scope for beginning this process directly now. The budget is thus a holding operation rather than the beginning of a long-term restructuring the fiscal structure and the government finances.
The BJP government came on the back of the long running battle between the state employees and the government on payment of dearness allowance. He state government employees got far lower than the central rates for DA for central government employees. The struggle had turned increasingly bitter.
As if to make matters worse, the outgoing chief minister had called the agitating state government employees’ demand for DA as the barking of dogs. The state employees were not only denied some financial benefits, they felt insulted.
The chief minister, Suvendu Adhikari, had promised the agitating state employees of “honourable treatment” while deciding on the issue if voted to power.
Now it was time to redeem his pledge. The budget has proposed a 20% hike in dearness allowance to employees, in a way overwhelming the expectations of the agitating employees. Certainly, the current finances do not admit such munificence. But what alternate the incumbent had.
Similarly, BJP had promised to pay out more to women in the state by way of subsidy of Rs 3000 per month. The Trinamool government had been paying Rs 1500 women under its scheme. Initially, the grant had garnered support for the party among women. However, this was once again overwhelmed with the offer of double that amount by BJP. The budget provides for payment of Rs 3000 to eligible women.
The silver lining is that the earlier scheme was largely misused. After coming to power, the new government quickly found out the ghost claimants of the women’s subsidy. Worse, scores of men were found to be drawing this women’s doles into their bank accounts. How this could have been done emails a mystery.
While some doles have been curtailed, many others have now been introduced. However, the finance minster and the new government seeks to minimise their burden state finances by cleverly tagging these to various central government projects. The earlier, Trinamool administration did not allow many of the central schemes out of its spite for the centre. It was like cutting one’s own nose to spite other’s show.
By aligning the state’s welfare measures with those of the centre, the budget has sought to minimise their impact on state finances by shifting the burden of funding to central schemes. With the so-called “double-engine sarkar” mode, it can be hoped that the centre would take a more sympathetic approach to West Bengal’s financial salvation.
Leaving the give-away and doles stories aside, the new government has initiated a few steps which can be construed as long term measures for building the state’s economy. Many of these are extra-budgetary moves but could prove to be extremely critical.
One such announcement is that for investments above a threshold of Rs100 crore, the investor need not seeking clearances like municipal permissions, and district level errancies. All these permissions and procedures would be deemed to have been cleared when the green signal is given at a higher level of administration. This is thus a system of singe-window clearance for large projects in the state.
In line with the policies of the centre, the state has proposed to set up at least four new airports in various locations which will mainly be funded under the ambitious programme for developing smaller airports and national connectivity. Besides, the Bagdogra airport in north Bengal would also be taken up for expansion.
A major sea-port is proposed to be developed on the Bengal coast in the Kandi district. A string of AIIMS-like medical centres are also proposed at various locations in state, more so, in different districts of north Bengal. The new government is proposing several projects for developments of tourism which is extremely rich in such potential.
A network of major and minor roads are also proposed to be taken up to more effectively connect the areas and for movement of people and products. The multiplier effects of such investments and their contributions to the economy could be enormous.
Even though the first BJP budget remains limited by various constrains, there are hopeful steps and moves from a new government in the state. The happier note is that after almost fifty years, the state government is looking forward to a new beginning in industrialisation and development. (IPA Service)
