The Finance Minister, Mr. Niranjan Pujari, presented the Budget for Odisha for the financial year 2020-21 on February 18, 2020.

Budget Highlights

• The Gross State Domestic Product (GSDP) of Odisha for 2019-20 (at current prices) is estimated to be Rs 5,33,822 crore.  This is an increase of 7.7% over the previous year (2018-19).  In 2018-19, GSDP grew at a rate of 14% over the previous year (at current prices).
   
• Expenditure for 2020-21 is estimated to be Rs 1,50,000 crore, an 11% increase over the revised estimate of 2019-20.  The revised expenditure for 2019-20 is Rs 4,000 crore (2.9%) lower than the budgeted estimate.
   
• Total receipts (excluding borrowings) for 2020-21 are estimated to be Rs 1,24,550 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 3,207 crore (2.8%). 
   
• Fiscal deficit for the year 2020-21 is targeted at Rs 17,878 crore (3% of GSDP).  In 2019-20, as per the revised figures, fiscal deficit is estimated to decrease by Rs 693 crore to 3.41% of GSDP, as compared to the budgeted estimate of 3.49% of GSDP.  The budget estimates a revenue surplus of Rs 9,509 crore (1.6%) in 2020-21.  
   
• Sectors such as Irrigation and Flood Control (28%), Welfare of SC, ST, OBC, and Minorities (16%), and Health and Family Welfare (15%) saw the highest increase in allocations.  

Policy Highlights

• Climate budget:   A Climate Budget has been introduced to provide an account of tracking climate public expenditure.  The document highlights climate change impact appraisal across various departments including agriculture, fisheries, forest, coast and disaster management, transport, rural and urban development, energy and health. 
   
• Water supply and conservation:  In-stream storage structures will be constructed in all major rivers over five years with an investment of Rs 12,000 crore.  The Drink from Tap Mission will be implemented to improve quality of drinking water in all 114 Urban Local Bodies and provide 24x7 water supply. 
   
• Agriculture:  A SAMRUDHI-Agriculture Policy 2020 has been proposed which is focused on farmers’ well-being through continuous and inclusive growth in their income.  
   
• Heritage:  65 acres around Lingaraj Temple, Bhubaneswar will be pedestrianised under the Ekamra Kshetra Amenities and Monuments Revival Action (EKAMRA) Plan, for which Rs 150 crore has been allocated.  Puri will be transformed into a world heritage city under the Abadha Plan, for which Rs 695 crore has been allocated.

Budget Estimates for 2020-21

• Total expenditure in 2020-21 is targeted at Rs 1,50,000 crore.  This is 11.1% higher than the revised estimate of 2019-20.  This expenditure is proposed to be met through receipts (other than borrowings) of Rs 1,24,550 crore (84%) and borrowings of Rs 24,450 crore (16%).  Total receipts (other than borrowings) in 2020-21 are expected to be 15.1% higher than the revised estimate of 2019-20.  Borrowings are estimated to increase by 41.4% in 2020-21, as compared to the revised estimate of 2019-20.
   
• In 2019-20, as per the revised figures, expenditure is estimated to decrease by Rs 4,000 crore (2.9%) over the budgeted estimate.  Receipts (other than borrowings) are estimated to be lower than the budgeted estimate by Rs 3,207 crore (2.8%), and borrowings are estimated to be lower by Rs 5,293 crore (23.4%).

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	1,13,949	1,39,000	1,35,000	-2.9%	1,50,000	11.1%
A. Receipts (except borrowings)	99,851	1,15,416	1,12,209	-2.8%	1,24,550	11.0%
B. Borrowings	10,003	22,584	17,291	-23.4%	24,450	41.4%
Total Receipts (A+B)	1,09,854	1,38,000	1,29,500	-6.2%	1,49,000	15.1%
Revenue Surplus	14,190	6,528	6,175	-5.4%	9,509	54.0%
As % of GSDP	2.86%	1.21%	1.16%		1.59%
Fiscal Deficit	10,157	18,877	18,184	-3.7%	17,878	-1.7%
As % of GSDP	2.05%	3.49%	3.41%		3.00%
Primary Deficit	4,357	12,377	11,744	-5.1%	10,718	-8.7%
As % of GSDP	0.88%	2.29%	2.19%		1.80%

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

Sources:  Odisha Budget Documents 2020-21 (Annual Financial Statement, MTFP Statement); PRS.

Expenditure in 2020-21

• Capital expenditure for 2020-21 is proposed to be Rs 35,209 crore, which is an increase of 19.8% 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 26,513 crore, which is 12.1% higher than the revised estimate of 2019-20.  Capital outlay on the irrigation sector is estimated to increase by Rs 1,028 crore (19% over 2019-20 revised estimate).
   
• Expenditure towards natural calamities:  In 2020-21, the state has allocated Rs 3,319 crore towards relief on account of natural calamities (revenue expenditure). This is 29% lower than the revised estimate of 2019-20.  Rs 3,200 crore has been allocated towards Disaster Response.  This includes Rs 2,157 crore from the State Disaster Relief Fund and Rs 1,043 from the National Disaster Relief Fund.
   
• Revenue expenditure for 2020-21 is proposed to be Rs 1,14,791 crore, which is 8.7% higher than the revised estimate of 2019-20.  Examples of revenue expenditure are subsidies, payment of salaries, and pension, and interest payments.
   
• Revenue expenditure forms 77% of the total expenditure in 2020-21.   The remaining expenditure consists of capital outlay (18%), and repayment and grant of loans (5%).

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	28,592	30,262	29,389	-2.9%	35,209	19.8%
of which Capital Outlay	23,482	24,473	23,655	-3.3%	26,513	12.1%
Revenue Expenditure	85,356	1,08,738	1,05,611	-2.9%	1,14,791	8.7%
Total Expenditure	1,13,949	1,39,000	1,35,000	-2.9%	1,50,000	11.1%
A. Debt Repayment	3,940	4,707	4,607	-2.1%	7,572	64.4%
B. Interest Payments	5,800	6,500	6,440	-0.9%	7,160	11.2%
Debt Servicing (A+B)	9,740	11,207	11,047	-1.4%	14,732	33.4%

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

Sector-wise Expenditure in 2020-21

The sectors listed below account for 72% of the total expenditure towards all sectors in 2020-21.  A comparison of Odisha’s expenditure on certain key sectors with that by the other states can be found in  Annexure 1 .

Table 3:  Sector-wise expenditure in Odisha 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, Sports, Arts, and Culture	17,020	19,522	19,080	20,640	8%	Rs 7,469 crore has been allocated towards government primary schools, and Rs 2,587 crore has been allocated towards government secondary schools.     Rs 3,157 crore has been allocated for the Samagra Shiksha Abhiyaan.
Agriculture and Allied Activities	8,077	12,955	12,361	11,911	- 4%	Rs 3,195 crore has been allocated towards the KALIA scheme.
Water Supply, Sanitation, Housing, and Urban Development	7,736	10,803	11,177	11,337	1%	Rs 2,000 crore has been allocated to the Jal Jeevan Mission.    Rs 518 crore has been allocated towards PMAY-Urban.
Rural Development	11,183	12,139	11,140	11,322	2%	Rs 3.962 crore has been allocated towards PMAY-Gramin and Biju Pucca Ghar.  Rs 1,501 crore has been allocated towards MGNREGS.
Transport	10,888	9,095	10,027	10,854	8%	Rs 2,272 crore has been allocated to road development programme.  Rs 2,500 crore has been allocated for the construction of 3,000 km of roads under PMGSY.
Social Welfare and Nutrition*	6,741	11,251	11,512	10,465	- 9%	Rs 2,345 crore has been allocated towards ICDS.
Irrigation and Flood Control	7,385	9,650	7,269	9,309	28%	Rs 1,811 crore has been allocated for the completion of AIBP Projects implemented through PMKSY.  Rs 1,060 crore has been allocated for flood control and drainage work.
Health and Family Welfare	5,703	6,804	6,702	7,727	15%	SCB Medical College will be transformed into an AIIMS Plus integrated medical institution.   Rs 1,108 crore has been allocated towards the Biju Swasthya Kalyan Yojana.  Rs 1,652 crore will be provided for National Health Mission.
Police	3,101	3,571	3,500	3,941	13%	Rs 655 crore has been allocated for construction of buildings for courts, police, fire service, jails, and police modernisation.
Welfare of SC/ST/OBC and Minorities	3,121	3,477	3,118	3,608	16%	Scholarships of Rs 356 crore and Rs 584 crore will be provided to SC and ST students respectively.
% of total expenditure	74%	75%	74%	72%

* Allocation towards Social Welfare and Nutrition includes allocation towards Relief on account of Natural Calamities.  

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

Transfers to local bodies:  The central government devolves a certain amount of funds to the state for local bodies (both rural and urban) as per the recommendations of the Finance Commission.   In addition, the state also devolves additional funds as per recommendations of their own State Finance Commission.   In Odisha, these funds are transferred towards the departments of Housing and Urban Development, and the Panchayati Raj and Drinking Water.  As per the 15^th Finance Commission, in 2020-21, Odisha will receive Rs 3,345 crore (Rs 2,258 crore for rural local bodies and Rs 1,087 crore for urban local bodies).  The table below shows the trends in transfer of funds as per the respective Finance Commissions.  

Table 4:   Transfers towards departments as per Finance Commissions (in Rs crore)

Department	2018-19 Actuals	2019-20 Revised	2020-21 Budgeted	% change from RE 2019-20 to BE 2020-21
Panchayati Raj and Drinking Water	15,417	17,890	17,606	-2%
Finance Commission	1,768	3,101	2,258	-27%
State Finance Commission	1,644	1,898	2,451	29%
Housing and Urban Development	4,537	5,540	6,180	12%
Finance Commission	293	542	1,087	100%
State Finance Commission	1,196	1,288	1,261	-2%

Sources:  Odisha Budget Documents 2020-21 (Budget at a Glance); PRS.
 

Receipts in 2020-21

• The total revenue receipts for 2020-21 are estimated to be Rs 1,24,300 crore, an increase of 11.2% over the revised estimate of 2019-20.  Of this, Rs 56,000 crore (45% of the revenue receipts) will be raised through state’s own resources, and Rs 68,300 crore (55% 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 19.2% over the 2019-20 revised estimate.  However, in 2019-20, devolution is estimated to decrease by 22.3% to Rs 30,453 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, including the revised share of Odisha and other states in central government’s tax revenue.

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	30,318	33,000	33,550	1.7%	38,350	14.3%
State's Own Non-Tax	14,277	12,500	14,500	16.0%	17,650	21.7%
Share in Central Taxes	35,354	39,207	30,453	-22.3%	36,300	19.2%
Grants-in-aid from Centre	19,598	30,559	33,282	8.9%	32,000	-3.9%
Total Revenue Receipts	99,546	1,15,266	1,11,785	-3.0%	1,24,300	11.2%
Borrowings	10,003	22,584	17,291	-23.4%	24,450	41.4%
Other receipts	305	150	424	182.6%	250	-41.0%
Total Capital Receipts	10,308	22,734	17,715	-22.1%	24,700	39.4%
Total Receipts	1,09,854	1,38,000	1,29,500	-6.2%	1,49,000	15.1%

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

• Non-tax revenue:  Odisha has estimated to generate Rs 17,650 crore through non-tax sources in 2020-21.  This is 21.7% higher than the revised estimates of 2019-20.  Of this, Rs 12,500 crore (71%) will be received from non-ferrous mining and metallurgical industries.
   
• Own tax revenue:  Total own tax revenue of Odisha is estimated to be Rs 38,350 crore in 2020-21 (31% of the revenue receipts).  This is 14.3% higher than the revised estimate of 2019-20.  The own tax to GSDP ratio is targeted at 6% in 2020-21, which is the same as the revised estimate of 6% in 2019-20.  This implies that growth in the collection of own taxes is at par with the growth rate of the state economy.

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

Head	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	% of Revenue Receipts in 2020-21
State GST	11,943	13,700	13,700	0.0%	15,469	12.9%	12.4%
Sales Tax and VAT	7,310	8,000	8,000	0.0%	8,750	9.4%	7.0%
State Excise Duty	3,925	4,500	4,600	2.2%	5,250	14.1%	4.2%
Electricity Tax and Duty	3,258	2,800	2,900	3.6%	3,150	8.6%	2.5%
Stamp Duty and Registration Fees	1,237	1,200	1,800	50.0%	3,000	66.7%	2.4%
GST Compensation Grants	3,390	4,867	6,027	23.8%	6,200	2.9%	5.0%

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

State Goods and Services Tax (SGST) is the largest component of tax revenue of the state.  It is expected to generate Rs 15,469 crore in 2020-21.  This is an increase of 12.9% from the revised estimate of 2019-20.     In 2020-21 the state is expected to generate Rs 8,750 crore from sales tax and VAT (on items such as petroleum products).  This is a 9.4% increase over the revised estimate of 2019-20.   In 2020-21, Odisha is expected to generate Rs 5,250 crore through state excise duty.  This is a 14.1% increase over 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. Odisha has estimated GST compensation grants of Rs 6,200 crore for 2020-21, which is an increase of 2.9% over the revised estimate of 2019-20. In 2019-20, compensation grants are estimated to increase by Rs 1,160 crore from Rs 4,867 crore at the budgeted stage to Rs 6,027 crore at the revised stage.  Note that no change is estimated in SGST revenue in the same year.  An increase in the compensation requirement of the state reflects a further decrease in the GST revenue growth rate, as compared to the 14% growth proposed under the Act.

Deficits, Debt, and FRBM Targets for 2020-21

The Odisha 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.  A revenue surplus implies that the revenue receipts of state are sufficient to meet the revenue expenditure requirements.

The budget estimates a revenue surplus of Rs 9,509 crore in 2020-21.  This implies that revenue receipts are expected to be more than revenue expenditure.  The 14^th Finance Commission had recommended that states should eliminate revenue deficit.  The 15^th Finance Commission does not suggest any revenue deficit grants for the state since it has been consistently witnessing a revenue surplus.

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 17,878 crore, which is 3% of GSDP.  The estimate is within the 3% limit recommended by the 14^th Finance Commission.  This limit may be relaxed to a maximum of 3.5%, if states are able to contain their debt and interest payments to certain specified levels.  In 2019-20, as per the revised figures, fiscal deficit is estimated to decrease by Rs 633 crore to 3.41% of GSDP, as compared to the budgeted estimate of 3.49% of GSDP.

Debt Servicing:  In 2020-21, Odisha is expected to spend Rs 14,732 crore on servicing its debt.  This is 33.4% higher than the revised estimate of 2019-20.  This includes Rs 7,572 crore (51%) towards repaying loans, and Rs 7,160 crore (49%) towards interest payments.

Outstanding debt:  Outstanding debt is the accumulation of borrowings taken by the state government over the years.  In 2020-21, the state’s outstanding debt is expected to be 19% of the GSDP.   This is marginally higher than the limit of 20% of GDP suggested by the FRBM Review Committee (2017) for the cumulative debt of all states.

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

Year	Revenue	Fiscal	Outstanding Liabilities
	Deficit (-)/Surplus (+)	Deficit (-)/Surplus (+)
2018-19 (Actuals)	2.9%	-2.1%	16.5%
2019-20 (RE)	1.2%	-3.4%	17.9%
2020-21	1.6%	-3.0%	19.0%
2021-22	1.9%	-3.0%	20.0%
2022-23	1.7%	-3.0%	21.0%

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

Figures 2 and 3 show the trend in deficits and outstanding debt of the state from 2018-19 to 2020-21.

Figure 2:  Revenue and fiscal balance (as % of GSDP)  Sources:  Odisha Budget Documents 2020-21; PRS. Note: Positive numbers indicate surplus, negative indicate deficit.

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