Expert Analysis: Punjab Budget 2012-13

IN a departure from the past the youthful Punjab Finance Minister Parminder Singh Dhindsa has proposed in his maiden budget a 10 per cent cut in ministers’ allowances, a ban on the purchase of new vehicles and a reduction in fuel and office expenses. There are two more positives: fiscal deficit is tolerable and the outlay for greening Punjab has been raised four-fold. However, in keeping with the Akali-BJP politics of populism, the minister has left subsidies untouched. He has hinted at raising Rs 2,000 crore later in the year by slashing unproductive expenditure and ensuring better tax compliance. Cost-cutting and revenue raising efforts are unheard-of in Punjab, where ruling politicians commonly resort to borrowings and selling government assets to fund their lavish lifestyle.
Punjab’s major problems are slowing growth, low quality education in government schools and colleges, spread of debilitating diseases, mismanagement of water resources, freebies and fiscal indiscipline. All these have not been adequately addressed. Punjab’s growth rate is 5.68 per cent compared to Bihar’s 13.1 per cent. The state lags because industrial expansion is hit by poor power supply and a near absence of foreign direct investment. Agricultural growth is plagued by stagnation in wheat-paddy production. The budget has hiked allocation for agriculture by 52 per cent but more funds alone are not enough.
The government needs to take some really tough decisions: downsize the top-heavy administration and privatise or close down unwanted boards and corporations. The high cost of administration, political and bureaucratic profligacy and general fiscal mismanagement have placed the state under an unsustainable debt of Rs 78,236 crore, which will shoot up to Rs 87,518 crore by the end of this fiscal. The state needs to channel resources into three priority areas: health, education and infrastructure. But it refuses to adequately tax the rich, including builders, transporters, hoteliers, mall and marriage palace owners. Subsidies can be pruned by weeding out the undeserving. The budget does not reflect any enthusiasm to initiate change. Perhaps, the re-election has made the Akali-BJP leadership happy with the way things are.