Two different parties ruled Madhya Pradesh (MP) during the tenure of the current 230-member assembly. With a poll scheduled for November 17, businessline evaluated the performance of the incumbent government on fiscal and social parameters.
The main shortcoming of the incumbent government has been not incentivising the development of services and manufacturing sectors. The economy will not move to the fast track unless this happens and will be subject to sharp whipsaws led by fluctuating agri prices. The government has also been fiscally lax this year, in letting the fiscal deficit go beyond the 3.5 per cent of GSDP limit in FY24. Steady growth in capex is however a positive.
On social parameters, there is marked improvement in availability of healthcare to low-income families. But progress in education, housing and water still leaves much to be desired.
Volatile agri-led growth
In MP, the agriculture sector accounts for the largest share at 47 per cent of GSDP, followed by the services sector at 34 per cent, and the manufacturing sector at 19 per cent. The raging inflation in food prices along with the food price shock caused by the Russia-Ukraine war appears to have helped the State recover strongly from the effects of the pandemic.
GSDP at current prices increased 18.1 per cent in FY22 and 16.43 per cent as per revised estimates for FY23. But the moderation in food inflation is dampening growth to around 5 per cent in FY24, close to the pre-pandemic growth.
This wild fluctuation in growth highlights the shortcoming of focusing too much on agriculture. Sandeep Shastri, National Coordinator of Lokniti network, told businessline that MP has prioritised agriculture and allied services in recent years. Better development in services and manufacturing could have led to a higher growth trajectory on a sustainable basis.
Steady growth in capex
MP has been maintaining a steady growth in capital expenditure (capex). It jumped sharply from a low base in 2020-21 to ₹40,733 crore in 2021-22. The momentum continued in 2022-23 with 11 per cent more capex as per revised estimates. In a year when the state goes to polls, expenditure on capital investments has been budgeted to increase 19 per cent to ₹54,056 crore.
Revenue expenditure is budgeted to grow 11 per cent. Schemes such as Baiga Bariya and Sahariya which promise to transfer ₹1,000 to the bank accounts of women belonging to backward tribes and the scheme to distribute e-scooters to female students will bump up the revenue expenses further.
Own tax revenue to be sedate
The State’s own tax revenue would have benefited from the shift to the GST regime. With MP being the sixth largest in population, it would get higher GST from the consumption in the State. On the other hand, the lower proportion of services reduces the consumption of high-value luxury products which attract higher GST.
The state’s own tax revenue witnessed strong growth from the Covid lows in FY22 and FY23. But tax collection is budgeted to moderate to 10.7 per cent in FY24, on cooling inflation and overall economic slowdown. Discontinuation of GST compensation cess will also impact revenue in the years ahead.
Fisc not under check
The government had kept the fiscal deficit under check before the pandemic at 2.70 per cent of GSDP in FY19. But it expanded sharply in FY21 as revenue was hit and expenses soared. The government has done well to reduce the fiscal deficit in FY23 to 3.6 per cent of GSDP, down from the budgeted fissure of 4.6 per cent of GSDP.
But it has budgeted its fiscal deficit at 4 per cent of GSDP in 2023-24, which is higher than the limit of 3.5 per cent as per the FRBM Act. The populist schemes and sedate growth in revenue seem to be taking a toll.
Total borrowings have therefore increased to ₹80,000 crore for FY24, registering a 14 per cent jump. “If we increasingly use a higher percentage of our revenues for debt servicing, then economists would say that is bad financial management,” says Shastry.
MP Economic Survey 2022-23 said though MP historically has not been a highly indebted state like some other states in India, the rising trend of public debt warrants attention.
Weak FDI flows
MP attracts less FDI (foreign direct investment) inflows than Maharashtra and Gujarat and was ranked 13th among all states in 2022-23. It attracted FDI inflows of $32 million (m) in FY19, followed by $75.65 m in FY20, $206.35 m in FY21, $208 m in FY22, and $39.4 m in FY23. Lack of FDI inflow impairs capital investments and points towards a relative lack of ease in doing business.
Improvement in health metrics
The gross enrolment ratio in Madhya Pradesh has declined for primary (1-8 standard) from 92.1 per cent in FY19 to 88.7 per cent in FY21. This appears due to the Covid-led disruption in low-income families. The GER in the State is however lower than the national average of 103.4 per cent for primary in 2021-22.
There is a however good improvement in health metrics. MP was above the national average of 86 per cent for births delivered in a health facility. It jumped from 80.8 per cent in NFHS-4 to 90.8 per cent in NFHS-5, recording an increase of more than 10 per cent.
The under-five mortality rate also declined from 51 per 1,000 live births in NFHS-4 to 41 per 1,000 live births in NFHS-5, a decline of 20 per cent. It was a tad below the national average of 42 per 1000 live births. This indicates that fewer children are losing their lives before they turn five in MP.
Stunting in children has also seen a significant decline in MP. According to the NFHS-5, 36 per cent of children under the age of five are stunted in MP, which is equal to the national average. This is a significant decrease from the 42 per cent stunting rate reported in NFHS-4.
Housing and water
The government has improved access to housing and clean water. But the facilities in the State are still not good enough compared to the rest of the country.
Though the percentage of people living in pucca houses in MP is increasing, it is below the national average of 60.3 per cent. The percentage of people living in pucca houses in MP has increased from 35.7 per cent in NFHS-4 (2015-16) to 45.2 per cent in NFHS-5 (2019-21).
Of the around 1.12 crore households in MP, 13.53 lakh had water supply connection till August 15, 2019. In the last four years, around 66.04 lakh households have got water supply connections, which is a five-fold increase in the last four years. However, this was below the national average of 70 per cent.