Revenue-Deficit Bengal Cannot Claim Credit For Social Welfare Schemes

Bengal Finance Minister Amit Mitra will present another revenue-deficit budget later this week. While there is nothing cardinally wrong with deficit budgets, Bengal’s budget for the next fiscal will present yet another nightmare for economists. For the simple reason that not only will the state’s revenue collections take a dip (as Chief Minister Mamata Banerjee has already warned), Bengal’s debt repayment liability will also go up.

According to the latest available figures, Bengal’s tax revenue was Rs 55,786 crore in 2017-18, but it had to pay Rs 52,000 crore as debt servicing. Another Rs 50,000 crore was spent on the unproductive heads of salaries, pensions and subsidies. Thus, Bengal’s expenses on these four major heads was double that of its income. In simple words, Bengal had no money to meet its expenses out of its own funds. It thus not only depended on the union government, it also borrowed more from the market to balance its books. In the 2018-19 financial year, Bengal’s tax receipts will be a fraction of what it spends on the four major heads of loan repayment, salaries, pensions and subsidies (for the various populist schemes Banerjee has launched).

Banerjee’s profligacy is to blame for the financial mess that Bengal finds itself in. True, she inherited a staggering debt burden of Rs 1.93 lakh crore from the Left Front when she took over in 2011. She immediately demanded that the union government grant a moratorium on Bengal’s debt repayment and debt restructuring. The United Progressive Alliance-II regime turned down these unreasonable demands on grounds that other states would also make similar demands and the country’s financial condition would land in a mess. The present government at the centre has also refused to entertain this demand despite Banerjee’s fulminations and threats.

Instead of tightening the purse strings and spending judiciously, Banerjee has done just the opposite in the past six years. She has been announcing one populist scheme after another and spending huge amounts on sops to targeted sections of the state’s population, including the minorities. She has also been spending huge amounts on doles to ‘clubs’ (Rs 600 crore in the last fiscal) that deliver votes to her party and on various fairs and celebrations. As a result, the state’s debt burden has only risen under her government’s rule.

In 2011, Bengal’s debt burden was Rs 1.93 lakh crore. Three years later, it had gone up to Rs 2.75 lakh crore. In 2015-16, it rose to Rs 2.99 lakh crore and in 2016-17, it stood at Rs 3.33 lakh crore. In 2017-18, the debt burden was Rs 3.66 lakh crore and in 2018-19, it will go up to Rs 3.84 lakh crore. There is no way that Bengal can ever hope to repay this staggering debt if it does not increase its revenue collections and drastically reduce its expenses. Revenue collections can rise significantly only if more industries come up. But that is clearly not happening, despite the tall claims by Banerjee. And expenses can be brought down by slashing subsidies and reducing the bloated government workforce. The populist Banerjee will do neither, and so there is no hope for an improvement in Bengal’s finances.

After coming to power, Banerjee announced a slew of welfare schemes like the Kanyashree (financial help to girls), Yuvashree (doles to unemployed youth), Sikshashree (scholarships to Scheduled Caste children), Sabuj Sathi (bicycles for school kids), Swasthya Sathi (free treatment in government hospitals), Tanti Sathi (old-age pensions to artisans and weavers) and Somobyathi (financial aid to families of people killed in natural disasters and even road accidents). The rice and wheat that Bengal supplies to 8.5 crore of its poor at Rs 2 a kilogram also costs a staggering sum of money. Add to this the annual doles to many, including the 15,000-odd clubs (which are patronised by her party leaders and decide the outcome of polls), and the fairs and celebrations like the Lok Sanskriti Utsav, the Mati Utsav, the Vivek Mela, the Subhas Mela and the Rakhibandhan Utsav that the Bengal government organises, and the spending on unproductive heads goes up manifold.

That Bengal’s financial condition has deteriorated sharply under Banerjee can also be judged from these figures. In 2011-12, Bengal paid nearly Rs 23,199 crore towards debt servicing, which was 39 per cent of its total revenue receipts of Rs 59,144 crore (of which its own tax collection was Rs 24,934 crore). Thus, the amount it paid as interest on debt was slightly lower than its own tax collections. But in 2016-17, Bengal spent Rs 94,256 crore on loan repayment, salaries, pensions and subsidies while its tax revenue was Rs 50,773 crore. Banerjee, thus, has dragged Bengal more into the red zone.

Fact is, Banerjee’s largesse does not come from the state’s own coffers. She, thus, is being generous with others’ money – primarily the Indian taxpayers’ money and those of the banks and financial institutions who have, and are, lending money to her. There is no virtue in being generous with others’ money. And, hence, Banerjee deserves no credit for the welfare measures she has announced and runs with borrowed money.

With the panchayat polls in Bengal due later this year and with the Lok Sabha polls next year, Banerjee is most likely to announce more doles, schemes and sops in the forthcoming budget. That will only increase Bengal’s debt burden and the state’s financial woes. But that is of no concern to a person for whom winning elections is more important than anything else.