The Hindu Business Line : Bengal fiscal situation getting worse: CAG

WEST Bengal's fiscal situation is deteriorating very fast, according to the Comptroller and Auditor General of India (CAG) in its review of the finances of the State between 1998-99 and 2002-03.

In its recently published report, the CAG has said that the State's fiscal imbalances were increasing and a large part of the fiscal deficit was used during the period under review for meeting current expenditure.

Balance from the State Government's current revenue was not only consistently negative, its magnitude was on the increase.

Moreover, with large revenue deficits (though marginally lower in 2002-03), a large part of the liabilities did not have an asset backup.

The ratio of assets to liabilities had declined to 0.35, indicating that more than half of the State's fiscal liabilities had ceased to have as asset backup.

The State's Plan expenditure locked up in incomplete projects continued to rise. From Rs 949 crore in 1998-99, it rose to about Rs 1,159 crore in 2002-03.

Moreover, the State's returns on investment in statutory corporations, rural banks, joint stock companies and co-operatives were "negligible" in each of the last five years under review.

The CAG report has said that since the Government was investing the interest-bearing borrowed funds, the difference between the rate of return on these investments and the average interest rate on its outstanding liabilities represented an implicit subsidy, which amounted to about Rs 2,094 crore during the 1988-2003 period.

The report said that the Government had been able to show a lower revenue deficit due to a substantial reduction in Plan expenditure. Overall revenue receipts increased from about Rs 9,387 crore in 1998-99 to about Rs 14,525 crore in 2002-03.

But compared to the State's own taxes in its total revenue, receipts declined from 51 per cent to 49 per cent. Contribution of grants-in-aid fell from 16 per cent in 1998-99 to 15 per cent.

Against the Eleventh Finance Commission's recommendation that interest payments as percentage of revenue receipts be kept at 18 per cent, the CAG said that the ratio had reached an all-time high of 54 per cent during 2002-03.

Financial liabilities increased from about Rs 31,954 crore in 1998-99 to about Rs 77,515 crore in 2002-03 at an average rate of 26 per cent during 1998-2003.

Net funds available as a percentage of total gross debt receipts declined from 48 per cent in 1998-99 to 40 per cent in 2002-03.

The ratio of fiscal liabilities to Gross State Domestic Product (GSDP) had been increasing continuously.

Average interest spread was negative in 2002-03 with GSDP growth of seven per cent in the same fiscal. The CAG said that persistence of this phenomenon might "endanger debt sustainability" of the State Government.

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