Hike in salaries to stretch state finances
B Sivakumar| TNN | Updated: Oct 11, 2017, 23:52 IST
In comparison, the government's tax revenue is expected to increase only by 15% as per the projections made by the government in its medium term fiscal plan submitted along with the budget in February. Since the impact of GST is not known fully, the government will have to do a tight-rope walk on its spending. Against this backdrop, distribution of freebies and other welfare aid, targeted at playing vote-bank politics, would become increasingly difficult.
"The government has not been able to meet its revenue targets for the past three to four years and the state has been incurring deficit in its revenue account. As per the fiscal responsibility budget management Act (FRBM Act), state and central governments must either have a net neutral revenue account or have a surplus. The state has ended up with deficit revenue accounts for successive years in the recent past," said a financial analyst.
Since the salary hike is to be implemented from November this year, the total impact of the salary bill of `14,719 crore will impact the government finances in this financial year. "In 2017-18, the government has to face the impact of GST as well as the massive increase in salary bill. As two quarters have gone by, the impact of GST and salary bill may increase the revenue deficit and consequently the fiscal deficit. It will not be possible for the finance department to meet the revenue and fiscal targets for this year as well as the coming years," said the analyst.
The continuous deficit in revenue account will affect government's capital expenditure. "It is the capital expenditure which leads to growth in the state. Tamil Nadu has been underspending in the capital account, but overspending in the revenue account. A state can forego its social programmes but not spending on capital expenditure will affect the state's GDP," he said.
Unless TN is able to shore up revenues from GST as well as from other tax revenues, the fiscal numbers may not be favourable to TN. "The government will be able to live within its means only if there is a tax revenue bonanza. Though GST is expected to increase the revenue by more than 14% annually, the initial confusion and many traders not filing returns may lower the revenue, resulting in revenue deficit," said an economist.
Chennai: The Tamil Nadu government's decision to implement the seventh pay commission recommendations will hike the pay bill by not less than `15,000 crore annually. The salary and pension bill, which was estimated at `66,908.59 crore in 2017-18, is likely to go up to `81,627.59 crore next fiscal, an increase of 21%.
In comparison, the government's tax revenue is expected to increase only by 15% as per the projections made by the government in its medium term fiscal plan submitted along with the budget in February. Since the impact of GST is not known fully, the government will have to do a tight-rope walk on its spending. Against this backdrop, distribution of freebies and other welfare aid, targeted at playing vote-bank politics, would become increasingly difficult.
"The government has not been able to meet its revenue targets for the past three to four years and the state has been incurring deficit in its revenue account. As per the fiscal responsibility budget management Act (FRBM Act), state and central governments must either have a net neutral revenue account or have a surplus. The state has ended up with deficit revenue accounts for successive years in the recent past," said a financial analyst.
Since the salary hike is to be implemented from November this year, the total impact of the salary bill of `14,719 crore will impact the government finances in this financial year. "In 2017-18, the government has to face the impact of GST as well as the massive increase in salary bill. As two quarters have gone by, the impact of GST and salary bill may increase the revenue deficit and consequently the fiscal deficit. It will not be possible for the finance department to meet the revenue and fiscal targets for this year as well as the coming years," said the analyst.
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The house tax has not ben increased for the past 20 years.The MTC bus fares amongst the lowest in the country.Open TASMAC shops every where so that excise collected increases.To add to problem increa... Read MoreThe continuous deficit in revenue account will affect government's capital expenditure. "It is the capital expenditure which leads to growth in the state. Tamil Nadu has been underspending in the capital account, but overspending in the revenue account. A state can forego its social programmes but not spending on capital expenditure will affect the state's GDP," he said.
Unless TN is able to shore up revenues from GST as well as from other tax revenues, the fiscal numbers may not be favourable to TN. "The government will be able to live within its means only if there is a tax revenue bonanza. Though GST is expected to increase the revenue by more than 14% annually, the initial confusion and many traders not filing returns may lower the revenue, resulting in revenue deficit," said an economist.
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