Rajasthan has joined the list of states whose debts are hovering around a precarious level of 40% of the gross state domestic product (GSDP). However, government officials say that the states Fiscal Responsibility and Budget Management (FRBM) has stayed under the permissible limit and a silver lining hence shall be seen soon.
Says Brijesh Kishore Sharma, director (Budget), Rajasthan government, “The FRBM in Rajasthan stays under permissible limit. There is no doubt that deficits have gone up and one of the reasons for the same is the Uday scheme. Had it not been there, revenue and fiscal deficits will not have surged. We have to pay interest of around Rs 8000 crore on loans we have taken under it. It is one of the major substantive reasons for rising deficits. Next, COVID has been one of the major reasons for shrinking revenues and rising expenditure. However, despite this pandemic challenge, we have kept the FRBM under the permissible limit. During normal times, the government has kept it at 3 per cent, then the govt increased it during the pandemic and hence we are under the permissible limit at 4.5.”
In the coming time, we can see a silver lining with normalcy returning. The virus impact is reducing and hence a boost to the economy is expected soon, he added.
The state government presented its annual budget recently.
As per this budget announcement, “The estimated fiscal deficit amounts to Rs 58 thousand 211 crore 55 lac which is 4.36% of the GSDP.”
The budget document says, “Fiscal variables (without COVID-19 effect) to Gross State Domestic Product in 2020-21 have touched 3.20 per cent while debt and other liabilities to Gross State Domestic Product in 2020-21 was 40.51%.”
It adds that “Fiscal deficit almost remains within touch of the FRBM Act, 2005 norms.
“If the effect of additional borrowing is excluded, then the fiscal deficit (without the COVID-19 effect) remains 32,468 crore which is 3.20 per cent of 37,654 crore (3.77 per cent) for the year 2019-20. Thus, the fiscal deficit almost remains within touch of the FRBM Act, 2005 norms,” says the Economic Review 2021-22 document released by the state government.
In 2017, the FRBM panel suggested a ceiling for general government debt (both Centre and states) of 60% of GDP by FY23. And within this overall limit, a ceiling of 40% was adopted by the Centre, and 20% by the states. However, there Rajasthan is amongst those states whose aggregate debt reached a 15-year high of 31.3% of the GDP in FY21 and is seen to be at roughly the same level in FY22.
The respective budget estimates suggest that states with the highest debt-GSDP ratio in FY22 are Punjab (53.3%), Rajasthan (39.8%), West Bengal (38.8%), Kerala (38.3%) and Andhra Pradesh (37.6%).
State BJP president Satish Poonia told IANS, “The debt on Rajasthan has been continuously increasing under the Congress government’s rule due to financial mismanagement. It has, in three years, increased by Rs 4.34 thousand crore; every person of the state is under a loan of Rs 52 000.”
“The Ashok Gehlot government alone took 25 per cent of the loans taken by all other governments during the last thirty years, which is affecting the governance of the state.”
Speaking on the latest budget, he said, “Debt to GDP ratio has increased to 59.03%. Also, fiscal deficit has increased to 4.36% which violates the FRBM limit of 3%.
The primary deficit has increased over the years. The state has failed in fiscal discipline and managing public finances. The interest payment has increased to Rs 28,83,811 lakh which is around 10 per cent of the total revenue expenditure of Rs 2,38,46,579 which is a cause of serious concern, he added.