According to reports, Indian states’ offer of ‘economically unsustainable’ sops like farm loan waivers, and restoring old pension systems is a matter of concern, SBI Research wrote in a report dated April 18.
“Telangana has committed 35% of revenue receipts of the state to finance the several populist schemes. In terms of percentage of states’ own tax revenue it is as whopping as 63%. Clearly, this is unsustainable and might be a potential recipe for fiscal disaster going forward”, the report said.
States including Rajasthan, Chhattisgarh, Andhra Pradesh, Bihar, Jharkhand, West Bengal and Kerala have committed to spend 5-19% of their revenue receipts on such schemes. In terms of percentage of state own tax revenue, this is as much as 53% for some of the states.
In offering such schemes, states seem to be currently living beyond their means and it is imperative that states rationalize their spending priorities in accordance with revenue receipts, the report said.
The fiscal situation of states has eroded owing to the COVID-19 pandemic. The report, authored by Dr Soumya Kanti Ghosh, notes that for as many as 18 states it studied, the average fiscal deficit (as % of GSDP) has been revised upwards by 50 bps to 4.0% for FY22, with 6 states slithering towards the red line, reporting fiscal deficit more than 4% of GSDP.
The fiscal deficit of seven states exceeded their budgeted target though 11 states have been able to keep their fiscal deficit equal to or lower than their budgeted numbers during FY22, the report said.
Bihar and Assam exceeded their fiscal deficit significantly as per RE FY22. Arunachal Pradesh, Jharkhand, Kerala, Maharashtra and Rajasthan also posted higher fiscal deficit than their BE. (Economic Times)
