The Hindu Business Line : Deteriorating finances a major concern for Goa

GOA's annual State Economic Survey (SES) 2004-05, while noting that the tiny State has admirably achieved a high level of development, both socially and economically, also reveals the scary side of "degeneration in its financial health".

The main culprit has been the huge contingent of Government employees the State is saddled with. The State has accomplished an annual compound growth rate of 8.11 per cent in Gross State Domestic Product (GSDP) during the period 1993-94 to 2004-05. Its per capita income of Rs 52,277 in 2002-03 was the highest in the country. The human development indicators such as birth rate, death rate, infant mortality rate, life expectancy, etc., could be the envy of many developed countries.

So much so that the Twelfth Finance Commission (TFC) assessed Goa as having the high human development and infrastructure indices. The National Population Commission ranked the State as the first among States and UTs in terms of 12 indicators on quality of life. But as one goes to analyse the unhealthy financial situation of the State, the same Survey reveals elsewhere that everything is not so hunky dory.

Much of these have been achieved by growing debt liability. Like many other States, the SES has pointed out that Goa's finances, too, heavily suffered on account of implementation of the Fifth Pay Commission scales, which plunged it into revenue deficit in 1997-98 from where it has never really recovered. From a situation of revenue surplus at 1.44 per cent of GSDP during 1993-94, the State slid to revenue deficit at 2.44 per cent of GSDP by 2003-04.

Increase in expenditure on pension as percentage of GSDP from 0.55 per cent to 1.28 per cent during 1993-94 to 2004-05 resulted in an annual compound growth rate of 10.67 per cent, 15.89 per cent and 24.09 per cent, respectively in its expenditure on salaries, interest and pensions. It is hardly surprising, therefore, that during this period, the public debt has also registered an annual compound growth rate of 19.06 per cent, which in turn reflects in the growing interest liability.

Goa, with a population of 13.5 lakh spread over two districts, has an army of 50,000 government employees. That virtually makes every 28th Goan a government employee. Particularly, departments such as Public Works and Water Supply, Electricity and Education are brimming with excessive staff. The salaries of aided-school teachers have become a continued run on the State treasury when ironically more teachers are getting surplus on account of dwindling enrolments in school with effective family planning.

As a consequence, over 70 per cent of the State's revenue expenditure accounts for non-Plan, which mainly comprises salaries, interest and pension which together account for 65 per cent.

The genesis of this problem is deep-rooted. Post-liberation, the then Union Territory lacked an industrial base, which meant the State Government continued for long to be the major source of employment. With liberal Central finances, it could afford this luxury. Government employment continued to be a major source of political patronage till Goa attained Statehood in 1987.

With Central assistance beginning to dwindle (and much of it coming as loans raising the annual debt-serving burden), the gravity of the problem began to surface. Unfortunately for the State, the period coincided with a 12-year phase of political uncertainty. Till as late as 2000, when Mr Manohar Parrikar of the Bharatiya Janata Party took over, hardly any serious thought was given to the deteriorating State finances. Apart from trying to enhance State revenue, Mr Parrikar tried to restructure the government expenditure.

A voluntary retirement scheme was introduced backed by an innovative pre-employment scheme to regulate government employment. The present Congress-led coalition government of Mr Pratapsinh Rane is struggling to reduce its fiscal deficit to avail itself of maximum benefits from the Tenth Finance Commission's largesse.

It has recently declared measures such as plans to adopt Fiscal Responsibility legislation and has introduced a new contributory pension fund for the new employees igniting hopes of fiscal revival.

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