Out of a budget spend of Rs 327,000 crore, the five guarantees are going to cost the government Rs 52,000 crore (on an annualised basis), or about 16% of the total. To accommodate this, the CM has reduced spending in several key areas with very significant impact.

First of all, capital expenditure (capex), which is meant to stimulate growth, is being reduced from Rs 52,700 crore to Rs 51,000 crore, or 3%. Taking inflation into account, the real reduction could be up to 10%. Within this, capex on irrigation projects is down a massive 21%. Industry and transport have also been reduced. Capex is meant to build productive assets, to stimulate income and employment growth. Hence, this reduction will impact the growth of our state as well as future employment, unless it is overcompensated by private sector investment or efficiency in governance. However, key sectors like irrigation are unlikely to be compensated by private sector investment.

Secondly, large-scale budget reductions of 20-30% in agriculture and rural development will impact growth and employment. The stimulus that the agri-rural sector and other employment-generating sectors need is jeopardised by lower allocations, impacting peoples’ earning capacities and increasing their dependence on public support.