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State Readies Budget Prep

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Odisha Government is hopeful of registering Seven Percent growth in 2021-22, though due to COVID-19 State is likely to contract by 1-2 Percent in 2020-21Fiscal.As the Odisha Government has decided to initiate the process of formulation of Budget Estimates for 2021-22, Economic Outlook for 2021-22 presents a positive scenario, officials say.

 Steps are taken for initiation of Budget Estimate 2021-22 preparation and to complete in time for enabling Department of Finance to present the Annual Budget in the Odisha Legislative Assembly at the appropriate time.
Principal Secretary Finance, Ashok Kumar Meena has brought to the notice of All Secretaries and heads Of Departments in this regard, while brining home to the point about the priorities of the State Government.

While Chief Minister Naveen Patnaik has made it clear that Odisha Government is very serious about restoring economy both at State level and at individual household levels as COVID-19 Pandemic has posed tremendous challenge to every sphere of Governance, Department of Finance is making all out efforts to meet the challenges.
The State has been fighting the pandemic since March, 2020 and the battle against the virus is likely to continue for some more time.

While priorities of the State Government in the medium-term still remains to achieve Sustainable Development Goals through faster reduction of poverty, increasing farmer’s income, providing piped drinking water to all, making available quality affordable health care facilities, enabling quality education & skills development, providing quality physical infrastructure for improving economic activities and empowering women, ST, SC & other vulnerable populations to enhance their participation in economic activities, but in short-run effective COVID management, saving lives and providing livelihoods to the people will remain priority, an official pointed out.

In case of Odisha, the economy is projected to contract by about 1-2 Percent in 2020-21 and it is expected to register a growth of about 7 Percent during 2021-22.

The economic contraction, both at national and sub-national level, will adversely impact the collection of direct and indirect taxes during 2020-21 and 2021-22. So, the share tax and the grant-in-aid receivables from Centre will be affected during 2020-21 as well as in 2021-22.

To counter the adverse impact of shutdown and lock-down on State’s resources, the State Government has taken some timely steps to raise one-time revenues through renewal of mining leases and mopping up of unused money parked in bank accounts.

These efforts have substantially reduced the resource gap and overall collection of the State’s own tax and non-tax till August, 2020 compared to previous year.

State’s own revenues are expected to register moderate growth in FY 2021-22, primarily due to contraction of base and moderate growth expectations for the State Economy.

The GST compensation in the year 2021-22 would depend on the performance of the economy.
Besides, there still remains uncertainty on the quantum of Share in Central Taxes as the State’s horizontal share may get changed in the Final Report of the 15th Finance Commission.

Considering all the factors, spending is expected to increase by about 12 percent in FY 2021-22 over the current year’s revised estimates.

As part of the Public Finance Management (PFM) Reform, the State Government had introduced a new budget making process for preparation of Annual Budget, 2020-21.

The preparation of Annual Budget for FY 2021-22 will be based on the principles adopted for Annual Budget, 2020-21 which inter-alia include advanced budget calendar, macro-fiscal forecasting and advanced indication of Departmental Ceilings.

The Departments will be given 2-3 months’ time to have thorough scrutiny and prioritization of the Budget proposals within the ceiling communicated.

All the Departments will be communicated with a multi-year ceiling, so that Departments would have predictability in fund flow and can make multi-year project planning.

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