How W.Bengal put a brake on the increase in the budget deficit
By Saibal Gupta
Kolkata, Feb. 26 (IANS): With the state budget just days away, it would be interesting to see how state financial adviser Amit Mitra has curbed the state’s growing budget deficit.
Experts are of the opinion that the financial situation of the state was showing signs of recovery despite the unpaid debts, but the financial burden caused by the social schemes announced by the state is having a negative impact on the financial health of the state .
The revenue shortfall has been pegged at Rs 26,755.25 crore, which is more than three percent of the state Gross Domestic Product (GSDP) limit. If we follow the past trend, the figure should increase further. The budget deficit increased from Rs 52,350.01 crore in 2020-21 to Rs 60,863.96 crore in 2021-22. The rise in the deficit is expected, given that government tax and non-tax revenues have fallen during the pandemic.
The state’s own tax revenue fell from Rs 60,669.37 crore in 2019-20 to Rs 59,886.59 crore in 2020-21 and its share in central taxes fell from Rs 48,048.40 crore to Rs 44,737.01 crore during the same period. The period was also marked by a drop in non-tax revenue from Rs 3,212.90 crore to Rs 2,466.31 crore.
Considering the pandemic-induced fall, the budget estimate of Rs 50,070.29 crore as the state’s share of central taxes, Rs 75,415.74 crore as its own tax revenue and Rs 4,611.72 as its non-tax revenues, seems unrealistic, meaning that the current fiscal year could end with a higher revenue shortfall as well as an increased fiscal deficit.
With a budget deficit estimated at 4.03% of its GDP, West Bengal is among the few states that have crossed the 3% threshold. In 2020-21, the percentage was 3.86 compared to 2.94% in 2019-20. In addition, the growth rate of GDP at constant prices for 2011-2012 increased from 4.17% in 2012-2013 to 6.13% in 2015-2016, 7.2% in 2016-2017 and 6.41% in 2018-19, but plunged again to 5.6% in 20-21. However, it has always remained below the national average.
Interestingly, Bengal’s debt-to-GDP ratio peaked in 2010-2011 at 41.9%, according to a survey sponsored by NITI Aayog and conducted by IIM Calcutta. It was the highest in the country. Since then, the ratio has gradually declined and stood at 34.75% in 2018-2019, but in the 2020-21 financial year it climbed again to 38.8%, indicating the pressure on the market. state economy.
A comparative study shows that the states with the highest debt to GDPR ratio in FY22 are Punjab (53.3%), Rajasthan (39.8%), West Bengal (38.8% ), Kerala (38.3%) and Andhra Pradesh (37.6%). percent). All of these states receive Revenue Deficit Grants from the Center.
Former central government chief economic adviser and BJP MP Ashoke Lahiri said: “What worries us the most is a steady rise in the primary deficit (budget deficit minus interest payments). The figures for RBI show that the GSDP to primary deficit was 0.4% in 2019-20 In a year that climbed to 1.4% and in 2021-22 to 1.9% This indicates that even if the interest charge is abolished, the State continues to borrow more”.
The state’s precarious financial situation was evident in the sudden increase in market borrowing. Borrowing in the West Bengal market so far in fiscal 2022 is 20% higher year-on-year, according to a report by CARE Ratings. Only Nagaland, up 71%, had higher borrowing over the period than West Bengal.
Haryana (by 11%), Sikkim (by 7%), Jammu and Kashmir and Maharashtra (by 4% each) and Rajasthan (by 3%) are the few other states which have higher borrowings. higher so far in the current fiscal year than in the comparable period of the previous year. In the case of the other remaining states, it is lower than last year.
According to the statement released by the Reserve Bank of India, the government is likely to borrow 12 times raising around Rs 20,000 crore in the market between the period of January 1 to March 31, which clearly shows that the government of the state is struggling to negotiate the expenses caused by the social schemes launched by Chief Minister Mamata Banerjee.
Interestingly enough, in the period between April 2020 and December 2020, when the state revenue dropped to an all-time high due to the pandemic situation and the resulting lockdown, the state raised about 35,000 crore from rupees in the market, but in the current financial year between April 2021 to December 2021, he opted for a market loan of Rs 52,500 crore. During the same period in 2019, the state borrowed Rs 28,000 crore through a state development loan.
Incidentally, when the 34-year reign of the Left Front ended in 2011 and Mamata Banerjee became the chief minister, the state’s accumulated debt was Rs 1.93 lakh crore. But, according to state government budget figures, the accumulated debt is expected to reach Rs 5.5 lakh crore by the end of the 2020-21 financial year.
The state government’s latest efforts to negotiate the huge cost of unplanned spending came to the fore when Chief Minister Mamata Banerjee recently ordered all departments to cut unnecessary spending beyond the approved budget and not take on any new project without the approval of the Secretary General of the State or the Department of Finance. The announcement was a clear indication that the government is trying to negotiate the financial burden caused by the unplanned spending of the unemployment policy announced by Chief Minister Mamata Banerjee ahead of the elections.
After coming to power for the third time, Chief Minister Mamata Banerjee announced two major projects – “Lakshmir Bhandar” and “Svastha Sathi” for all – programs which require huge financial involvement. “Lakhmir Bhandar” is a project where the state is supposed to give Rs 1,000 to women belonging to SC/ST/OBC and Rs 500 to women belonging to general caste. The government has allocated a budget of about Rs 12,900 crore to about 1.8 crore women who have so far enrolled in the scheme.
Initially, the government had estimated that nearly 2 crore beneficiaries would enroll in the “Lakshmir Bhandar” project, but so far the government has received an application for 1.63 crore of which 1.52 crore have been approved. Nearly 7 lakh requests have been canceled. The government has spent more than Rs 800 crore on the project and based on the figure, the Ministry of Finance estimates that the state government will have to shell out another Rs 5,600 crore which in turn could lead to a staggering figure over a full fiscal year.
Against the Center Ayushman Bharat, the state started its own scheme – “Sastya Sathi Prokolpo” where some citizens of the state received annual medical coverage of five lakh rupees. After coming to power in 2021, the Chief Minister opened ‘Svastha Sathi’ to all citizens of the state, resulting in a surge in spending. Even a year ago when the estimated budget for this project was around Rs 925 crore, this year the allocation touched an astronomical figure of Rs 2,000 crore per annum.
According to experts, with the decline in revenue generation, multiple borrowing from the market has now become the key constraint for the government of West Bengal to meet its recurrent expenditures.
They are of the view that the state struggles with unplanned spending mainly to fulfill promises made by Chief Minister Mamata Banerjee during her election campaign.