Informist, Friday, Mar 31, 2023
MUMBAI – The gross market borrowing of states in the financial year starting Apr 1 is estimated at 8.2 trln rupees, compared with 7.6 trln rupees in the current financial year, according to a research report released by State Bank of India’s economic research department.
Meanwhile, the net borrowings are pegged at 5.3 trln rupees, slightly lower than 5.4 trln in the current year, mainly due to robust revenues expected from state taxes and Goods and Services Tax.
For the upcoming financial year, GST revenue is budgeted to increase 16% with most of the states projecting growth in the range of 10-20%, the report said.
For states’ tax revenue in 2023-24 (Apr-Mar), states have budgeted average growth of 16% at around 19.5 trln rupees, against the revised estimate of 21% increase in 2022-23. A few states such as Uttar Pradesh have budgeted 42% on-year growth in the upcoming financial year over the current one. Even Jharkhand has budgeted higher growth of 25% in 2022-23.
The central government has allocated 1.3 trln rupees to assist states in catalysing investments in the economy through 50-year interest-free loans, over and above normal borrowings.
As per the Finance Commission, states will be allowed a fiscal deficit of 3% of gross state domestic product, with an additional 0.5% tied to power sector reforms. Under conditional borrowing, states may commit to reforms and be eligible for higher borrowing of about 1.5 trln rupees.
The Centre has pushed states to reduce their off-balance sheet borrowing, which limits their spending capacity. This, the report said, was essential and would enhance transparency.
The report said that many states had announced significant amounts of budgetary allocation to pensions and subsidies for electricity or power, which are economically unsustainable given the financially bad shape of many states.
Currently, states seem to be living beyond their means, and it is imperative that they rationalise their spending priorities in accordance with their own tax revenue, the report said. End
Reported by Nishat Anjum
Edited by Avishek Dutta
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