The Hindu Business Line : States yet to take advantage of eased deficit norms

Bangalore, July 2 States have failed to take advantage of the relaxation in the fiscal deficit cap to 3.5 per cent of their gross State domestic product as against the level of 3 per cent mandated in the Fiscal Responsibility and Budget Management Act, 2003. According to the Economic Survey 2008-09, tabled in Parliament on Thursday, the fiscal deficit of States for 2008-09 is expected to be 2.1 per cent of gross domestic product (GDP) or Rs 1.12 lakh crore, against 2.3 per cent of GDP or Rs 1.07 lakh crore in 2007-08.

Revenue surplus

As against a sharp increase in revenue deficit of the Centre to 4.5 per cent of the GDP in 2008-09, against 1.1 per cent in 2007-08, the revenue surplus of States is expected to rise by nearly Rs 6,000 crore — from Rs 22,526 crore in 2007-08 to Rs 28,526 crore (Budget estimates or BE) in 2008-09. The Survey notes: “The revised estimates (RE) for 2007-08 for States indicated that 13 States (non-special category) had achieved revenue surpluses with Bihar achieving the highest revenue surplus at 3.6 per cent of GSDP. Besides, nine achieved the target of limiting their gross fiscal deficit to 3 per cent of GSDP in 2007-08 (RE).”

The combined revenue deficit of Centre and States has been pegged at 0.5 per cent (BE of Rs 2.44 lakh crore) of GDP in 2008-09, as against 0.9 per cent in 2007-08, while the combined fiscal deficit has been pegged at 4.6 per cent, against 5.2 per cent last year.

The Survey also points to a modest growth in revenue from value added tax (VAT) in 2008-09, as against earlier years. For April-December 2008, VAT revenues were up 19.1 per cent in 33 States, over the corresponding period in 2007-08. VAT revenues were up 33 per cent in 2007-08 and 21 per cent in 2006-07. The Survey points out that the Centre has released Rs 14,806 crore against claims on account of transition to VAT. The claims made on this count are Rs 16,349 crore as on March 31, 2009, according to the Survey. For the phasing out of central sales tax, the Centre has received claims worth Rs 5,017 crore, of which Rs 4,118.9 crore has been released.

Receipts and expenses

Both, receipts of states – which include tax transfers from the Centre – and expenditure have fallen as a proportion of GDP since 2003-04. Receipts and expenditure fell from 18.7 per cent of GDP (Rs 5.14 lakh crore) in 2003-04 to 16.8 per cent (BE of Rs 8.92 lakh crore) in 2008-09. With combined Centre and State expenditure remaining almost the same over this period as a proportion of GDP, the falling shares of States point to greater concentration of economic power in the hands of the Centre. The combined expenditure of the Centre and States in 2008-09 (BE), at Rs 14.85 lakh crore, amounts to 27.9 per cent of the GDP, as against 28.9 per cent of GDP (Rs 7.96 lakh crore) in 2003-04.

The Survey points out that fiscal consolidation over the years has been achieved through a growth in tax receipts of the Centre and States since 2003-04. It points out: “As a proportion of GDP, receipts of the consolidated General Government rose from a level of 15 per cent in 2003-04 to 18.5 per cent in 2007-08.

It was budgeted at 19.1 per cent in BE 2008-09 (Rs 12.35 lakh crore)...With total disbursement remaining more or less same..., the combined fiscal and revenue deficit came down (as a proportion of GDP).”

Disinvestment contributed Rs 25,165 crore (BE) to Centre and State revenues in 2008-09 and Rs 44,525 crore in 2007-08.

More Stories on : States | Economic Survey | Karnataka

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Cabinet approves re-introduction of Cos Bill

States yet to take advantage of eased deficit norms

AIR, DD programme officers protest career stagnation