The Chief Minister, Mr. Manohar Lal, presented the Budget for Haryana for the financial year 2020-21 on February 28, 2020.

Budget Highlights

• The Gross State Domestic Product (GSDP) of Haryana for 2020-21 (at current prices) is estimated to be Rs 9,39,720 crore.  This is based on the estimate that the state’s economy will grow at a rate of 13% from the year 2019-20.  In 2019-20, GSDP is estimated to grow at a rate of 13.3% over the previous year.
   
• Expenditure for 2020-21 is estimated to be Rs 1,42,344 crore, a 10% increase over the 2019-20 revised estimate.   The revised expenditure for 2019-20 is Rs 2,807 crore (2.1%) lower than the budgeted estimate.
   
• Total receipts (excluding borrowings) for 2020-21 are estimated to be Rs 94,070 crore, an increase of 11% as compared to the revised estimate of 2019-20.  In 2019-20, total receipts (excluding borrowings) are estimated to fall short of the budgeted estimate by Rs 4,680 crore (5.2%).
   
• Fiscal deficit for the year 2020-21 is targeted at Rs 25,682 crore (2.73% of GSDP).  The budget also estimates a revenue deficit of Rs 15,374 crore (1.64% of GSDP) in 2020-21, i.e. 60% of the fiscal deficit.  In 2019-20, revenue deficit is estimated to increase by Rs 2,653 crore (22.1%) from the budgeted stage to the revised stage.
   
• Sectors such as Irrigation (65%), Agriculture and allied activities (33%), and Education (28%) saw the highest increase in allocations over the previous year.  Allocation to the Energy sector saw the highest decrease (42%).

Policy Highlights

• Subsidised electricity for agriculture-based activities:   A new category of electricity connections will be created for ‘special agriculture-based activities’ under which electricity will be supplied at a cost of Rs 4.75 per unit, instead of the existing Rs 7.5 per unit.  This category will cover activities such as grading, packing, precooling and ripening, beekeeping, and fish farming, and also cover certain cold storage facilities.
   
• Interest-free loans for farmers:  Earlier, farmers were not required to pay any interest on loans of up to Rs 1.5 lakh taken from cooperative banks.   The scheme has been extended to cover loans taken by farmers from all nationalised and cooperative banks.  It covers loans of an amount up to Rs 60,000 per acre (with a maximum limit of Rs 3 lakh).  However, this benefit will be only available if the loans are repaid timely.
   
• Education:  4,000 play way schools will be opened in the state for children in the age group of three to five years.  500 new crèches will be opened for children of working women.  Adarsh Sanskriti senior secondary schools will be set up in 98 blocks across the state.  1,000 new ‘bag-free and english medium’ schools will be set up in those villages of the state which have more than two government primary schools.

Budget Estimates for 2020-21

• Total expenditure in 2020-21 is targeted at Rs 1,42,344 crore, which is 10% higher than the revised estimate of 2019-20.  This expenditure is proposed to be met through receipts (other than borrowings) of Rs 94,070 crore (68%) and borrowings of Rs 44,439 crore (32%).  Total receipts (other than borrowings) in 2020-21 is expected to be 11% higher than the 2019-20 revised estimate.  In 2019-20, as per the revised figures, expenditure is estimated to decrease by Rs 2,807 crore (2.1%) in comparison to the budgeted estimate, whereas receipts (other than borrowings) are estimated to fall short by Rs 4,680 crore (5.2%).

Table 1:  Budget 2020-21 – Key figures (in Rs crore)

Items	2018-19 Actuals	2019-20 Budgeted	2019-20 Revised	% change from BE 2019-20 to RE 2019-20	2020-21 Budgeted	% change from RE 2019-20 to BE 2020-21
Total Expenditure	1,10,402	1,32,166	1,29,359	-2.1%	1,42,344	10.0%
A. Receipts (except borrowings)	71,306	89,447	84,767	-5.2%	94,070	11.0%
B. Borrowings	34,265	42,767	41,181	-3.7%	44,439	7.9%
Total Receipts (A+B)	1,05,571	1,32,214	1,25,947	-4.7%	1,38,509	10.0%
Revenue Deficit	11,270	12,022	14,675	22.1%	15,374	4.8%
As % of GSDP	1.54%	1.53%	1.76%		1.64%
Fiscal Deficit	21,912	22,462	23,437	4.3%	25,682	9.6%
As % of GSDP	2.98%	2.86%	2.82%		2.73%
Primary Deficit	8,360	5,829	7,274	24.8%	7,544	3.7%
As % of GSDP	1.14%	0.74%	0.87%		0.80%

Note:  BE indicates Budget Estimate and RE indicates Revised Estimate.

Sources:  Haryana Budget Documents 2020-21 (Annual Financial Statement, Budget at a Glance); PRS.

Expenditure in 2020-21

• Capital expenditure for 2020-21 is proposed to be Rs 37,006 crore, which is a decrease of 0.3% over the revised estimate of 2019-20.  Capital expenditure includes expenditure affecting the assets and liabilities of the state, such as: (i) capital outlay, i.e. expenditure which leads to creation of assets (such as bridges and hospitals), and (ii) repayment and grant of loans by the state government.
   
• In 2020-21, capital outlay is estimated to be Rs 13,201 crore, which is 8.9% (Rs 1,288 crore) lower than the revised estimate of 2019-20.  This decrease in 2020-21 is largely due to a Rs 5,190 crore decrease in allocation for providing equity capital to electricity distribution companies, which is being provided till 2019-20 under the UDAY scheme.  In 2019-20, capital outlay is estimated to decrease by Rs 1,771 crore (10.9%) from the budgeted stage to the revised stage.
   
• Sectors receiving the highest allocation for capital outlay in 2020-21 include transport (19% of the total capital outlay), irrigation and flood control (18%), and education (13%).   In 2019-20, capital outlay towards power projects is estimated to form 40% of the total capital outlay, primarily due to the UDAY scheme.
   
• Revenue expenditure for 2020-21 is proposed to be Rs 1,05,338 crore, which is 14.2% higher than the revised estimate of 2019-20.  Examples of revenue expenditure are subsidies, and payment of salaries, pension, and interest.  Revenue expenditure forms 74% of the total expenditure in 2020-21.  Rest 26% of the total expenditure comprises of capital outlay (9%), and repayment and grant of loans (17%).

Table 2:  Expenditure budget 2020-21 (in Rs crore)

Items	2018-19 Actuals	2019-20 Budgeted	2019-20 Revised	% change from BE 2019-20 to RE 2019-20	2020-21 Budgeted	% change from RE 2019-20 to BE 2020-21
Capital Expenditure	33,246	37,924	37,103	-2.2%	37,006	-0.3%
of which Capital Outlay	15,307	16,260	14,489	-10.9%	13,201	-8.9%
Revenue Expenditure	77,156	94,242	92,256	-2.1%	1,05,338	14.2%
Total Expenditure	1,10,402	1,32,166	1,29,359	-2.1%	1,42,344	10.0%
A. Debt Repayment	17,184	20,257	21,155	4.4%	22,592	6.8%
B. Interest Payments	13,551	16,633	16,162	-2.8%	18,138	12.2%
Debt Servicing (A+B)	30,735	36,890	37,318	1.2%	40,729	9.1%

Sources:  Haryana Budget Documents 2020-21 (Annual Financial Statement); PRS.
          

Sector-wise Expenditure in 2020-21

The sectors listed below account for 66% of the total expenditure towards all sectors in 2020-21.  A comparison of Haryana’s expenditure on certain key sectors with that by the other states can be found in   Annexure 1          .

Table 3:  Sector-wise expenditure in Haryana Budget 2020-21 (in Rs crore)

Sector	2018-19 Actuals	2019-20 Budgeted	2019-20 Revised	2020-21 Budgeted	% change from RE 2019-20 to BE 2020-21	Budget provisions for 2020-21
Education	13,068	15,346	15,750	20,169	28.1%	Rs 1,766 crore has been provided as capital outlay on education, sports, art, and culture. Rs 641 crore has been allocated for the Sarva Shiksha Abhiyan and Rs 340 crore for the Mid-Day Meal scheme.
Social Security and Welfare	6,886	8,096	7,933	9,347	20.3%	Rs 6,069 crore has been given for pension under various social security schemes.
Energy	12,948	13,172	12,884	7,437	-42.3%	Rs 6,360 crore has been allocated for providing subsidy for rural electrification and for domestic consumers.
Urban Development	4,222	5,903	5,684	6,549	15.2%	Rs 609 crore and Rs 1,200 crore has been given as grants to municipalities by the Union and State Finance Commissions.
Health and Family Welfare	4,011	5,016	5,296	6,512	23.0%	Rs 737 crore has been allocated for the National Health Mission and Rs 278 crore for the Ayushman Bharat scheme.
Rural Development	3,421	5,362	5,191	6,327	21.9%	Rs 1,264 crore and Rs 1,140 crore has been given as grants to panchayats by the Union and State Finance Commissions. Rs 860 crore has been allocated for the Haryana Gramin Vikas Yojana.
Agriculture and allied activities	5,208	4,539	4,478	5,950	32.9%	Rs 454 crore has been allocated for management of crop residue and Rs 345 crore for the PM Fasal Bima Yojana.
Police	4,131	5,043	4,959	5,580	12.5%	Rs 3,919 crore has been provided for expenditure on district police forces.
Transport	4,558	5,442	5,012	5,473	9.2%	Rs 2,176 crore has been provided for expenditure on Haryana Roadways.
Irrigation and Flood Control	2,745	3,400	3,048	5,020	64.7%	Rs 1,000 crore has been provided for creation of capital assets under the project for development of village ponds.
% of total expenditure	66%	65%	66%	66%

Sources:  Haryana Budget Documents 2020-21 (Annual Financial Statement, Detailed Demands for Grants, Budget Speech); PRS.

Committed expenditure:  Committed expenditure of a state typically includes expenditure towards payment of salaries, pension, and interest.  A larger proportion of the budget allocated for committed expenditure items limits the state’s flexibility to decide on its other expenditure priorities such as capital investment.  In 2020-21, Haryana is estimated to spend Rs 54,150 crore on committed expenditure, i.e. payment of salaries, pension, and interest (equivalent to 60% of the state’s revenue receipts).  This implies that the state has 40% of its revenue receipts left for all other kinds of expenditure.  Any additional expenditure will be met through borrowings.

In 2020-21, Rs 27,012 crore (i.e. almost half of the committed expenditure) is estimated to be spent on payment of salaries.  This is 20.8% higher than the expenditure estimated towards payment of salaries in 2019-20.  30% of the revenue receipts of the state are estimated to be spent on payment of salaries in 2020-21.

Table 4:   Committed expenditure for Haryana in 2020-21 (in Rs crore)

Item	2018-19 Actuals	2019-20 Budgeted	2019-20 Revised	% change from BE 2019-20 to RE 2019-20	2020-21 Budgeted	% change from RE 2019-20 to BE 2020-21
Salaries	19,259	21,902	22,360	2.1%	27,012	20.8%
Pension	8,140	9,000	9,080	0.9%	9,000	-0.9%
Interest	13,551	16,633	16,162	-2.8%	18,138	12.2%
Committed Expenditure	40,950	47,534	47,602	0.1%	54,150	13.8%

Sources:  Haryana Budget Documents 2020-21 (Annual Financial Statement); PRS.
          

Receipts in 2020-21

• The total revenue receipts for 2020-21 are estimated to be Rs 89,964 crore, an increase of 16% over the revised estimate of 2019-20.  Of this, Rs 67,524 crore (75% of the revenue receipts) will be raised through state’s own resources, and Rs 22,440 crore (25% of the revenue receipts) will be in the form of central transfers, i.e. state’s share in central taxes and grants-in-aid from the central government.
   
• Devolution:  In 2020-21, receipts from the state’s share in central taxes is estimated to increase by 19.3% over the 2019-20 revised estimate.  However, in 2019-20, devolution is estimated to decrease by 36.6% to Rs 7,112 crore as compared to the budgeted estimate.  This may be due to a 19% cut in the union budget for devolution to states, from Rs 8,09,133 crore at the budgeted stage to Rs 6,56,046 crore at the revised stage.     Annexure 2           outlines the major recommendations of the 15^th Finance Commission for the year 2020-21.
   
• Non-tax revenue:  In 2020-21, the state’s non-tax revenue estimate is Rs 15,428 crore, 52.2% higher than the 2019-20 revised estimate.  The major sources of state’s non-tax revenue are: (i) Rs 7,497 crore through service fees and other receipts of the Town and Country Planning department (Rs 4,499 crore increase from previous year), (ii) Rs 2,428 crore from Haryana Roadways, and (iii) Rs 1,000 crore from mining royalties.

Table 5:  Break up of state government receipts (in Rs crore)

Items	2018-19 Actuals	2019-20 Budgeted	2019-20 Revised	% change from BE 2019-20 to RE 2019-20	2020-21 Budgeted	% change from RE 2019-20 to BE 2020-21
State's Own Tax	42,581	51,105	47,842	-6.4%	52,096	8.9%
State's Own Non-Tax	7,976	10,025	10,135	1.1%	15,428	52.2%
Share in Central Taxes	8,255	11,217	7,112	-36.6%	8,485	19.3%
Grants from Centre	7,074	9,873	12,492	26.5%	13,955	11.7%
Revenue Receipts	65,885	82,219	77,581	-5.6%	89,964	16.0%
Borrowings	34,265	42,767	41,181	-3.7%	44,439	7.9%
Other receipts	5,421	7,227	7,186	-0.6%	4,106	-42.9%
Capital Receipts	39,686	49,995	48,367	-3.3%	48,545	0.4%
Total Receipts	1,05,571	1,32,214	1,25,947	-4.7%	1,38,509	10.0%

Sources:  Haryana Budget Documents 2020-21 (Annual Financial Statement, Detailed Receipts); PRS.

• Own tax revenue:  Total own tax revenue of Haryana is estimated to be Rs 52,096 crore in 2020-21 (58% of the revenue receipts).  This is 8.9% higher than the revised estimate of 2019-20.  However, as per the 2019-20 revised estimate, own tax revenue is estimated to decrease by 6.4% from the budgeted estimate.  The own tax-GSDP ratio is targeted at 5.5% in 2020-21, which is lower than the 2019-20 revised estimate of 5.8%.  This implies that growth of own tax collections is expected to be lower than the GSDP growth.

Table 6:  Major sources of state’s own-tax revenue (in Rs crore)

Items	2018-19 Actuals	2019-20 Budgeted	2019-20 Revised	% change from BE 2019-20 to RE 2019-20	2020-21 Budgeted	% change from RE 2019-20 to BE 2020-21
State GST	18,613	22,750	19,724	-13.3%	22,350	13.3%
Sales Tax/ VAT	8,998	10,900	10,900	0.0%	10,702	-1.8%
State Excise	6,042	7,000	6,700	-4.3%	7,500	11.9%
Stamp Duty and Registration Fees	5,636	6,500	6,600	1.5%	7,500	13.6%
GST Compensation Grants	2,820	3,000	6,000	100.0%	7,000	16.7%

Sources:  Haryana Budget Documents 2020-21 (Annual Financial Statement, Detailed Receipts); PRS.

State Goods and Services Tax is the largest component of own tax revenue, and accounts for 25% of state’s revenue receipts.  It is expected to generate Rs 22,350 crore in 2020-21, 13.3% higher than the revised estimate of 2019-20. In 2020-21, the state has estimated a revenue of Rs 10,702 crore from sales tax/ VAT, which is 1.8% lower than the revised estimate of 2019-20.

GST Compensation:  The GST (Compensation to States) Act, 2017 guarantees states compensation for five years (till 2022) for any revenue loss arising due to GST implementation.  The Act guarantees states a 14% annual growth on their revenue which was subsumed under GST.  If the GST revenue of a state does not match the guaranteed growth, compensation grants are provided to meet the shortfall. Haryana has estimated GST compensation grants of Rs 7,000 crore for 2020-21, a 16.7% increase over the 2019-20 revised estimate.  In 2019-20, it expects compensation grants of Rs 6,000 crore, which is much higher than the Rs 2,820 crore received in 2018-19.  An increase in state’s compensation requirement reflects a further decrease in GST revenue growth rate, as compared to the 14% growth proposed under the Act.

Deficits, Debt, and FRBM Targets for 2020-21

The Haryana Fiscal Responsibility and Budget Management (FRBM) Act, 2005 provides annual targets to progressively reduce the outstanding debt, fiscal deficit, and revenue deficit of the state government.

Revenue deficit:  It is the excess of revenue expenditure over revenue receipts.  A revenue deficit implies that the government needs to borrow in order to finance its expenses which do not create capital assets.  Once the revenue deficit is accounted for, only then the borrowings can be used for capital investments.

The budget estimates a revenue deficit of Rs 15,374 crore in 2020-21, which is 1.64% of GSDP.  The 14th Finance Commission had recommended that states should eliminate revenue deficit.  In 2019-20, revenue deficit is estimated to increase by Rs 2,653 crore (22.1%) from the budgeted stage to the revised stage.

Debt Servicing:  In 2020-21, Haryana is expected to spend Rs 40,729 crore on servicing its debt.  This is 9.1% higher than the revised estimate for 2019-20.  This includes Rs 22,592 crore towards repayment of loans, and Rs 18,138 crore towards interest payments.

Fiscal deficit:  It is the excess of total expenditure over total receipts.  This gap is filled by borrowings by the government, and leads to an increase in total debt.  In 2020-21, fiscal deficit is estimated to be Rs 25,682 crore, which is 2.73% of GSDP.   The estimate is within the 3% limit recommended by the 14^th Finance Commission.  The state’s fiscal deficit estimate for 2020-21 implies that net borrowings of Rs 25,682 crore are required to meet the expenditure target for the year.  Out of this amount, Rs 15,374 crore (60% of the fiscal deficit) is estimated to be used for bridging the state’s revenue deficit.  The rest 40% of it is estimated to be spent as capital outlay.

Outstanding debt:  Outstanding debt is the accumulation of borrowings taken by the state government over the years.  At the end of the year 2020-21, the state’s outstanding debt is expected to be 21.1% of GSDP.  This is slightly higher than the 20% of GDP limit suggested by the FRBM Review Committee (2017) for the cumulative debt of all states.

Table 7:  Budget targets for deficits for Haryana in 2020-21 (% of GSDP)

Year	Revenue	Fiscal	Outstanding Debt
	Deficit (-)/Surplus (+)	Deficit (-)/Surplus (+)
2017-18	-1.69%	-3.05%	22.3%
2018-19	-1.54%	-2.98%	21.4%
2019-20 (RE)	-1.76%	-2.82%	21.3%
2020-21 (BE)	-1.64%	-2.73%	21.1%

Sources: Haryana Budget Documents 2020-21 (MTFP Statement); PRS.

Figures 2 and 3 show the trend in deficits and outstanding debt of the state from 2017-18 to 2020-21.

Figure 2:  Revenue and fiscal deficit (as % of GSDP) Sources:  Haryana Budget Documents 2020-21; PRS.

Figure 3: Outstanding debt (as % of GSDP) Sources:  Haryana Budget Documents 2020-21; PRS.

Annexure 1:   Comparison of states’ expenditure on key sectors