I am of the opinion that at times extraordinary circumstances do call for ordinary responses. Think of the ordinary as old grandmother says, to protect your prestige, you have to protect your family silver fast. Unfortunately, the interim budget does not provide indications that the UPA will meet to these challenges if it were to come to power again. Fiscal prudence is the need of the hour. But the interim budget falls short on that count. I would draw the attention of this House relating to the state of affairs of State finances. It is in the news again. But after almost seven odd years of tranquility, State deficits are set to reapper. The growth in States tax revenue and resources are slowing down. The Union Government is not in a position to feed the States even. Expenditures are expected to continue. By one estimate, a 4 per cent shortfall in their budgeted revenue for 2008-09 is likely to wipe out the surpluses accumulated by the States. In 2007-08, 28 States had a revenue surplus of Rs. 22,000 crore, a remarkable turnaround from a deficit of Rs. 63,400 crore barely four years earlier in 2003-04. But these years are anomalous compared with the trend. The first year since 1987-88 that States witnessed a revenue surplus. The problem today is, on the revenue side, slower economic growth is going to result in lower VAT contribution. VAT contributes nearly 42 per cent to the States tax. States excise, stamp and registration duties together account for around 17 per cent of revenue. This will also be hit. This may be much less compared to the situation that prevailed when the Fifth Pay Commission Award was implemented. But what complicates things is that when combined with heavy expenditure by the Centre, slow economic growth.
