'Reduction in deficit, improved revenue positive indicators in State budgets'

Our Bureau Kolkata | Updated on December 27, 2012

Assocham feels that the positive indicators in the State budgets are a reduction in States’ deficits and improvement in revenues, both locally generated and devolution from the Centre. However, the industry body fears that this may be upset by a plethora of promises made by the political parties in power in different States.

An Assocham study: An Appraisal of Finances of States, released on Thursday, said over the past two decades States have attempted to phase out fiscal imbalances and improve revenue productivity and efficiency.

Fiscal balance

“By and large fiscal imbalances have been reducing across States owing to the enactment of the FRBM Act,” the paper mentioned.

An RBI study forecasts that from 2012-13 onwards the “consolidated revenue surplus is budgeted to increase in revenue receipts coupled with a reduction in revenue expenditure”. 

The key issue is how the expected larger revenue surplus would be used whether to provide sops to the electorate or for capital expenditure that could build long-lasting assets.

While the RBI study says that revenue surplus would “enable a reduction in the GFD-GDP (gross fiscal deficit to gross domestic product) ratio” and that 26 of the 28 States met the ratio set by the 13th Finance Commission, Assocham believes that the tendency would be for squandering these surpluses in popularity contests. 

GSDP growth

In terms of gross state domestic product States such as Punjab, West Bengal and Andhra Pradesh have been found to be laggards with less than double-digit numbers. Bihar, on the other hand, has been more than the national average in the period 2006-12.

The decentralisation of economic investment decisions has given rise to competitive spirit among States to unlock their growth potential. Public resources are being complimented with private resources to catalyse the process of development.

Published on December 27, 2012

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