A social sector spending boost, focussed overwhelmingly on the education and health sectors, may have been the underlying theme of this year's Delhi Budget, keeping with the broader 'aam aadmi' thrust of the AAP government. The fiscal prudence of the populist schemes, though, have come in for question for the manner in which the almost across-the-board increase in expenditures would be met, especially in the wake of a ballooning subsidy burden. A revenue surplus of Rs 6,079.53 crore in 2014-15 and a fiscal surplus of 0.05 per cent of GSDP notwithstanding, the slew of populist measures have the potential to drain away the surpluses, if the subsidies in the electricity and water sector that have already been earmarked by the Arvind Kejriwal government are to be factored in. The fiscal pressure, according to SP Sharma, chief economist, PHD Chambers, could intensity "if GST is not implemented next year." The higher allocation in the Budget has been made possible by the fact that the state has largely been fiscally resilient, he said. "Due to better fiscal position there was room to provide subsidies and higher allocation. These populist measures were anticipated. It will be resilient for the next 1-2 years due to the inherent surplus. Social sector spending has always been high in Delhi because not much is in control of the state. It is only human capital or infrastructure that the state can spend on," Sharma said. The fiscal deficit of state reduced from 1.01 per cent in 2013-14 to a fiscal surplus of 0.05 per cent of GSDP in 2014-15. However, considering that Delhi’s economy is predominantly service-based, contributing 87.28 per cent to GSDP in 2014-15, if the deadline for introduction of goods and services tax (GST) from April 1, 2016, is missed, "populism and subsidies will start exerting pressure". Introduction of GST will add massively to the state's revenue as it will allow the state to tax services, hitherto taxed by only the Central government. In its Budget 2015-16, the government's total expenditure for 2015-16 has been pegged at Rs 41,129 crore, 18 per cent higher than the revised estimates of Rs 34,790 crore in 2014-15. Of this, a total of Rs 9,836 crore has been allocated for the education sector, with a plan outlay of Rs 4,570 crore. This is a staggering 106 per cent jump vis-a-vis Rs 2,219 crore allocated in last fiscal. Further, the Delhi government has set aside Rs 4,787 crore for the health sector, and Rs 3,695 crore for the transport sector in the plan outlay. While a large chunk of this expenditure is estimated to be financed through tax revenue pegged at Rs 34,661 crore in the Budget, there is scepticism given the fact the state of tax collection has not been very encouraging last year. Tax collection grew just 2.64 per cent last fiscal as against a growth of 10.61 per cent in 2013-14 and 17.32 per cent in 2012-13. The tax collection target in the current fiscal is 30 per cent higher than Rs 26,602 crore received last fiscal. Since nothing has changed dramatically so far, there are apprehensions that the tax target is unlikely to be met. While the government is banking on taxes and a growing economy, in the long run if it wants to boost spending, "you need to have a long-term plan and find out resources for the work. There is fiscal pressure when the increase in expenditure is not met by a corresponding increase in revenue," Devendra Kumar Pant, chief economist and senior director, India Ratings, said. "As of now Delhi has fiscal space and as long as the push is for improving quality of education and health it should be fine. But if it continues to give sops and subsidies, there will be problem," Pant said. The fact that all components of tax — stamps and registration, state excise, value added tax (VAT) , tax on motor vehicles, and other taxes — witnessed moderation in the last fiscal as compared to 2013-14 has added to the apprehension. The collection from stamp and registration duty contracted 4.34 per cent in 2014-15 compared to -4.16 per cent in 2013-14. Similarly, VAT collection was up just 2.03 per cent as against a growth of 13.43 per cent in 2013-14 as per the state's Economic Survey 2014-15. Rajiv Kumar, an economist and senior fellow at the Centre for Policy Research, said, that revenue can be augmented if the state government is able to weed out corruption from property registration and sales tax, and reduce transmission and distribution losses in the power sector.
