The Hindu Business Line : CAG cautions AP on getting into debt trap

The ever-increasing ratio of fiscal liabilities to Gross State Domestic Product (GSDP), together with growing revenue deficit, could lead Andhra Pradesh into a debt trap, according to the Comptroller and Auditor-General of India.

The CAG report for 2004-2005, dealing with the State finances, observed that about 32 per cent of the State's liabilities have no asset back-up. During 2004-2005, the interest payments were Rs 7,091 crore, which was nearly 25 per cent of the revenue receipts. The outstanding fiscal liabilities, as of March 2005, were Rs 74,288 crore, which is equivalent to 37 per cent of the GSDP.

The average rate of interest paid on the borrowings in 2004-2005 (about 10 per cent) was equal to the average rate of growth of GSDP.

The Government, during the year, did not depend on ways and means advances or overdraft from the Reserve Bank of India for its day-to-day expenditure.

Revenue deficit

The revenue deficit decreased from Rs 3,771 crore in 2003-2004 to Rs 3,387 crore in 2004-2005, mainly due to a growth in revenue receipts by seven per cent against five per cent increase in revenue expenditure. However, the fiscal deficit increased from Rs 7,450 crore in 2003-2004 to Rs 8,192 crore in the current year mainly due to increased capital expenditure in irrigation and flood control.

The CAG observed that the Government had failed to achieve the target of bringing down revenue deficit as per the agreement with the Government of India. Overall, revenue receipts increased from Rs 19,475 crore in 2000-2001 to Rs 28,750 crore in 2004-2005. During 2004-2005, 70 per cent of the revenue (Rs 20,010 crore) was from the State's own resources, which increased by 15 per cent over the previous year.

While the Central tax revenue was witness to an increase of 20 per cent, the grants-in-aid from the Government of India was down by about 39 per cent. The arrears of revenue as of March 31, 2005 were up at Rs 5,028 crore.

Commensurately, the expenditure of the State increased from Rs 27,183 crore in 2000-2001 to Rs 38,315 crore in 2004-2005. The total expenditure was up 8 per cent.

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