The Yogi Adityanath-led BJP government in Uttar Pradesh is all set to present its annual budget 2021-22 on Monday. This will be the last budget of the BJP government before the state goes to polls early next year. While the budget is expected to be fairly populist in nature, it is likely to largely follow the trend set by the Union government and prioritise infrastructure, health, MSMEs and skill development.
With Covid-19 generating extra pressure on heath sector, the government is likely to make a major increase in allocation in health sector. The temporary measures to upgrade health infrastructure to cope with Covid are likely to be institutionalised and made permanent. This may include covering the cost of vaccines in this budget and also upgrading the infrastructure of hospitals.
With Prime Minister Narendra Modi exhorting states to synchronise their budgets with that of the Centre in order to take full advantage of the production linked incentives (PLI) schemes announced to boost manufacturing in the wake of Covid, the UP budget, too, is likely to see a lot of action on that front.
The infrastructure sector, too, is likely to remain in focus, with pressure for funding road building and highways, especially with the state government rolling out its ambitious Ganga Expressway project. The Agri sector, too, is likely to see increased allocation, with the government likely to make provisions for clearing the cane dues of government cooperative sugar mills.
Arvind Mohan, professor of economics, Lucknow University feels that UP has done relatively well than many other states in the country largely because it was one of the few states that realised early on that this was not merely a health challenge but a much bigger economic challenge.
“As a result, it undertook many strategic policy decisions, such as opening up liquor vends earlier than others. The results have shown a significant increase in revenue collections,” he said, adding that the revenue surge has given UP more fiscal space, as compared to most states in India.
“Fiscal deficit will definitely be pressure on UP too, largely because the central collections have gone down. This will be marginally compensated by the state’s own performance. UP has managed its tax collections very well. Tax flows from UP’s OTR sources have shown very interesting results, with a significant rise in GST collections, excise receipts and a similar rise in stamp and registration collection and in transportation-related revenues. While significant fiscal deficit pressures would still remain, but it will be much lesser than what we saw in the case of GoI, where the fiscal deficit jumped to 9.5%,” he says adding that he anticipates the state’s fiscal deficit in FY21 to be around 5%.