Budgets of southern states for 2009-10 indicate that states are slowly moving away from the path of fiscal discipline forsaking earlier efforts to control deficits due to the pressure of vote bank politics and global meltdown.
Revenue and fiscal deficits
State finances are becoming out of sync with the declared policy mentioned in the FRBM Act of the states namely, wiping out Revenue Deficit and containing Fiscal Deficit (see Table 1). The positive trends in the budget figures of the southern states seen in the last few financial years are being reversed due to the slow down of the economy. The mainstay of state finances namely, indirect tax revenues, have started declining and mounting welfare and relief expenditure in the backdrop of unemployment and poverty is contributing to widening deficits. Fiscal deficit is still less than three per cent of GDP in all the four states. A uniform feature in the 2009-10 budgets of southern states is that they have given priority for agriculture and allied sectors along with social welfare.
Though the revenue and expenditure figures (given in Table 2) for 2009-10 (B.E) compared to 2008-09 (R.E.) show marginal increases, estimates of buoyancy in revenue receipts have been affected by recessionary trends.
Revenue mobilisation measures
Tamil Nadu: VAT exemptions and rate reductions
In the backdrop of the ensuing parliamentary elections in April/May 2009 the Tamil Nadu Budget contains only VAT exemptions and rate reductions without any additional revenue mobilisation efforts except through better tax administration.
Tax exemptions announced in the budget cover: pepper and cumin seeds, pulses, grams peas and peas dhal, along with hand-made steel trunk boxes and handmade tin containers.
Tax rate reductions have also been announced for the following items: ghee, branded pickles, handmade iron safe, dried grapes, bleach liquid, paper pin, safety pin, gem clip, identity card clip, examination board clip, rubber band and stapler pin, and IT products such as I-pod, MP3 and MP4 players (reduced from 12.5 per cent to 4 per cent).
Andra Pradesh: vote on account budget
Andra Pradesh budget for 2009-10 is a vote-on-account budget since the assembly elections are to be held along with parliamentary elections. The budget contains only reports on achievements of the government in the last five years both under development and welfare schemes without any measures to augment the revenue of the state.
Karnataka: tax concessions
 In the budget speech it has been mentioned that rate of increase in tax collection in 2008-09 is expected to be around 10.7 per cent. It has also been predicted that the total revenue from commercial taxes during 2009-10 is expected to be Rs. 25,125 crore. Tax exemptions announced in the budget will cover: foodgrains and pulses (to be extended for one more year); baje and footwear costing up to Rs.100. Sales tax exemption has been extended upto 75,000 litres of diesel sold to fishermen. Luxury tax exemption limit increased to Rs.499. 4 per cent tax concession on some more goods sold through canteen stores department and all tread rubber used in re-treading tyres.
Tax rates have been reduced to 2 per cent on tamarind and soap nut, coconut, copra and desiccated coconut powder and areca nut. Tax on cinemas reduced to 30 per cent. Stamp duty on all transfer of moveable properties reduced from 7.5 per cent to 6 per cent, which would result in revenue loss of Rs. 400 crore. Motor vehicle tax collection is estimated to yield Rs. 2063 crore and lifetime tax on electric motor vehicles reduced to 4 per cent. The collection on state excise is expected to be Rs.6565 crore for 2009-10.
Kerala: neither new taxes nor increase in rates.
Kerala budget for 2009-10 contains several tax reductions and tax exemptions: the tax on light emitting diode lamps has been reduced to 4 per cent; tax rate on aluminium composite panel, plastic coated kitchen stand and cement paving block has been reduced from 12.5 per cent to 4 per cent. Under exemption category the following items have been listed: khadi sliver/roving, palm jaggery and its products, products of screw pine, centrifuged latex…
Development and welfare
Tamil Nadu: priority to agriculture and social welfare
In the Tamil Nadu budget for 2009-10 a sum of Rs. 5236 crore has been provided for agricultural development. A sum of Rs. 533 crore has been allocated for irrigated agriculture modernisation and water-bodies’ restoration and manage-ment project. For interlinking of rivers a sum of Rs. 200 crore has been allocated. With a view to preventing flooding of Chennai Metro, a major project at an estimated cost of Rs.1448 crore has been approved under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM).
The government has decided not to charge interest on co-operative crop loans for all farmers who repay their crop loans on time from the ensuing financial year. The government will pay that interest to the co-operative institutions for which a provision of Rs. 140 crore has been made in the budget.
To help agriculturists, Tamil Nadu government reduced the land tax to Rs. 2 per acre for dry land as against the average levy of Rs.15 per acre at present and Rs.5 per acre for wet land as against an average levy of Rs.50 per acre at present from the coming year. This announcement is as good as abolition of land revenue in the state, and would benefit about 50 lakh farmers.
A sum of Rs.3087 crore has been provided for capital expenditure on road development and bridge works along with Rs.880 crore for road maintenance works for 2009-10. For the purchase of new buses, a sum of Rs. 250 crore has been allocated. A provision of Rs. 600 crore has been made as the state government's share for Chennai Metro Rail Project. Protected drinking water supply will be provided to 8000 rural habitations at a cost of Rs.700 crore. A sum of Rs.441 crore has been allocated for the construction of concrete houses under the Integrated Housing and Slum Development Programme. Provision of Rs. 200 crore has been made for a new Legislative Assembly complex. An Information Technology Park is being established at Coimbatore at a cost of Rs.380 crore.
Rs.152 crore has been provided for the Tamil Nadu Agricultural Labourers Welfare Board. For the continuation of supply of free power to all farmers a sum of Rs. 279 crore has been earmarked in the budget. For providing essential food items like toor dhal, urad dhal, palm oil, wheat flour and cooking at affordable prices along with one rupee a kg. rice to card-holders, a sum of Rs.2800 crore has been made in this budget as food subsidy. A sum of Rs.500 crore has been allocated in the budget for free distribution of 25 lakh colour television sets.
For providing basic amenities and developmental works, allocations have been made under the following schemes namely; Anaithu Grama Anna Marumalarchi Thittam – a sum of Rs.509 crore, Namakku Naame Thittam – Rs.50 crore, Samathuvapurams – Rs.75 crore and National Rural Employment Guarantee Scheme – Rs.1750 crore.
For the welfare of women, a sum of Rs. 250 crore has been allocated. Other schemes announced in the budget are: Rs. 150 crore for Marriage Assistance Scheme, Rs. 140 crore for free gas stoves and connections, Rs. 911 crore for pension to old aged persons and destitutes, Rs. 75 crore for the disabled, Rs. 30 crore for improvement to fishing harbours and fish landing centres, Rs. 25 crore for Adi Dravidar and Tribal Welfare and Rs. 66 crore for the new medical insurance scheme for the welfare of government employees and pensioners.
Andra Pradesh: an election eve progress report
The vote-on-account budget reveals the priority given to agriculture and social sectors. Rs. 5000 crore has been allotted for the weaker section housing programme. The housing scheme is also extended to the urban middle class families. For the pension scheme for the old aged, widows, destitutes, physically challenged, weavers… an amount of Rs. 2004 crore has been provided. A contributory pension scheme has been introduced for self-help groups for which an amount of Rs. 365 crore has been earmarked. A sum of Rs. 3000 crore has been earmarked as food subsidy for providing rice at Rs.2 per kg, pulses at Rs.30 per kg and vegetable oil at Rs.35 per kg.
For treatment of serious ailments for families living below poverty line, the Rajiv Aarogyasri Community Health Insurance Scheme has been introduced with a provision of Rs. 625 crore. Another Rs.205 crore has been earmarked for providing interest subsidy to SHGs. An amount of Rs. 5040 crore is allocated as power subsidy.
Health and family welfare gets Rs.3543 crore. A sum of Rs. 370 crore has been provided for fee reimbursement and scholarships to economically backward students along with a sum of Rs. 4825 crore for BC, SC, ST and minority welfare. Rs.312 crore have been allocated for one time write- off of loans sanctioned to the weavers' cooperative societies and individual weavers. Other allocations are: Rs. 2927 crore for agriculture and allied activities, Rs. 2383 crore for higher education and Rs. 9047 crore for school education. Pending recommendation of the Pay Revision Commission, very liberal interim reliefs of 22 per cent and 15 per cent have been given to all the state government employees and pensioners respectively.
Karnataka: emphasis on agriculture, rural development and infrastructure
In the Karnataka budget for 2009-10 the following allocations have been made: for agriculture and allied sectors, Rs. 250 crore; subsidy of Rs. 2100 crore for electrification of pumpsets used in agriculture; for the development of 2500 km of rural roads Rs.800 crore has been provided; Rs. 3000 crore has been earmarked for development of Bangalore city, Rs. 600 crore to increase the supply of drinking water for Bangalore.
For providing electricity to all hutments and thandas of the state Rs.100 crore will be spent under Ganga Kalyan scheme for families below poverty line. A sum of Rs. 600 crore has been earmarked for providing housing and educational facility to Scheduled Castes and Scheduled Tribes. Women and child development gets Rs. 20 crore.
For supplying essential commodities to families below poverty line through PDS, an allocation of Rs. 750 crore has been made. Rs. 30 crore for the construction of living cum work sheds for weavers. For support price of agricultural crops Rs. 750 crore has been allotted. An allocation of Rs. 221.25 crore has been made for procurement of ambulances under 'arogya kavacha' and free health insurance to poor families. Rs. 100 crore allocation has been made for the purchase of 4000 new vehicles, infrastructure development scheme and addition to tourism get Rs. 180 crore.
Kerala: diversification of state public sector undertakings
The Kerala budget for 2009-10 contains a new initiative with a public investment of Rs. 4000 crore for diversification of state public sector undertakings, for joint ventures with the Central government and direct investment of Central public sector undertakings. Gulf Malayalees have participated in the formation of INKEL, which is a joint venture enterprise with 26 per cent equity participation from the state government; it is likely to take up projects like the Malabar Convention Centre, Financial Hub, and International Industrial Park.
The following allocations have been made for the agriculture and allied sector: Rs. 56 crore for paddy cultivation, Rs.25 crore for coconut development, Rs. 200 crore for minor, major and medium irrigation schemes and Rs. 74.16 crore for animal husbandry and dairy development. Rs. 50.9 crore for the handloom industry, Rs. 2 crore to bamboo, Rs.35 crore for small scale industries, Rs. 3.24 crore for the development of existing industrial estates have been provided.
With a view to developing the IT infrastructure, an allocation of Rs. 385 crore has been made; along with Rs. 18.49 crore for different programmes to be implemented by the IT Mission. 2009-10 would be observed as energy conservation year. Rs. 20 crore has been allocated for providing CFL bulbs. In addition modernisation of transmission gets Rs. 314.88 crore, strengthening distribution network gets Rs. 333 crore and rural electrification Rs. 30 crore.
The vital Kerala Water Transport Department gets Rs. 5 crore along with Rs. 98 crore for the national waterways and for the upgradation of canals. The Kerala Shipping and Inland Navigation Corporation gets Rs. 6 crore.
The budget contains the following allocations for the education sector: Rs.101 crore for upgrading the quality of education, Rs.220 crore for primary education under Sarva Siksha Abhiyan, Rs.54.28 crore for computerisation of high schools and higher secondary schools, Rs.32 crore for laboratories, libraries and workshops in the higher secondary and vocational higher secondary schools, and Rs. 10 crore for noon-meal scheme in schools.
Public health gets Rs. 490 crore in which Rs. 120 crore goes for the purchase of medicines, Rs.72 crore for medical education, Rs. 10 crore for ayurveda and Rs. 12 crore homeopathy. Water supply sector during 2009-10 would get Rs. 2000 crore for the implementation of various projects in the state.
The Social Welfare Department gets an allocation of Rs. 146 crore. In this under special component plan, housing gets top most priority with Rs.50 crore and another Rs. 30 crore for providing house sites to the landless. Kudumbashree is the most important initiative of government on women development with an allocation of Rs. 30 crore.
Social security measures to people below poverty line includes ration rice at Rs. 2 kg; over and above this rice would be provided through Maveli stores at Rs. 14 kg. A sum of Rs. 250 crore has been allotted for food subsidy. Minimum pension for persons above 65 years of age belonging to families below poverty line has been enhanced to Rs.250. Penal interest and loans amounting to Rs. 25,000 to scheduled castes, scheduled tribes and converted Christian communities from government departments, corporations and cooperatives will be waived.
Annual Plan outlays
Annual Plan Outlay of 2009-10 for the four Southern states have gone up marginally with maximum increase in Karnataka followed by Kerala, Tamil- Nadu and Andhra Pradesh.
In the Tamil Nadu Plan, agriculture and allied sectors have been provided Rs.5296 crore followed by Rs.3391 crore for health and family welfare. According to the Reserve Bank of India Report, Andra Pradesh stood first in the country in respect of allocation of Plan expenditure to agriculture, rural development and social sector. This is reflected in the plan allocation for 2009-10.
In the Karnataka, agriculture and allied activities get Rs.2440 crore, Rs.6017 crore for power, Rs. 4714 crore for irrigation and Rs.3063 crore for rural development.
In the Kerala Plan, a stimulus package has been announced for increasing employment, income, production and productivity. Allocation has been made for schemes like fishing harbour bridges, coastal highway, rehabilitation of schools and hospitals.
Budgetary trends of four southern states for 2009-10 reveal the negative impact of economic downturn witnessed by the states in the last one year along with the inherent political compulsion aggravating the problems in state finances.
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