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Fiscal deficit a whopping Rs 8,801 cr
Ruchika M. Khanna/TNS

Chandigarh, March 14
Punjab’s revenue growth may have been robust this fiscal but the huge debt burden, servicing this debt and implementation of the fifth pay commission’s recommendations have resulted in the poll-bound Akali-BJP government being neither able to provide much relief to people nor to draw up a roadmap for fiscal growth in the state. As the government presented its last budget during its term, with a huge fiscal deficit of Rs 8,801 crore, it had little to offer to either agriculture, industry or the services sector.

Considering that the ruling alliance is due to seek the peoples’ mandate in the assembly polls scheduled for early next year, the budget has failed to provide a definite roadmap for revenue growth. Relying solely on an increase in value added tax (VAT) and excise collections, the state is hoping to fulfill the path laid by the 13th finance commission on bringing down the fiscal and revenue deficits and the debt to gross state domestic product ratio. While presenting her maiden budget in the Punjab assembly today, Finance Minister Upinderjit Kaur said that the state was on a ‘correctional’ path to improving its state of finances.

“The tax revenue has shown a robust growth of 44.49 per cent in this financial year. Though this has mainly been on account of the economy getting back on track after a year of slowdown (in 2009-10), we are expecting the revenue collections to rise by 17. 31 per cent in 2011-12 as well - through an increase in VAT and excise collections,” she said.

Debt to GSDP ratio lowered

The finance minister said the debt to GSDP ratio has also been brought down from 31.80 per cent in 2009-10 to 30.40 per cent this year. It is expected to be at almost similar level in the coming financial year as well (30.43 cent). In the past one year Punjab has managed to bring down the revenue deficit to 1.62 per cent of the GSDP, which is expected to be brought down further to 1.33 per cent in 2011-12. The fiscal deficit this year is likely to be 3.14 per cent of GSDP (Rs 7,188.66 crore). For the next fiscal, this deficit to go up to Rs 8,801.33 crore, but this will mainly be on account of higher capital expenditure.

However, the main concern for the state will be the rising debt burden. Though the state does not have enough means of revenue generation, an additional expenditure of over Rs 10,000 crore because of pay hike and arrears to employees; high rate of interest being charged on loans against small savings; huge servicing cost of debts; and dwindling share of the state in distribution of central taxes. All of these have managed to push the state’s debt burden to Rs 69,549 crore this year. This debt burden is expected to go up to Rs 77,585 crore in 2011-12.

Kaur admitted: “Given the financial constraints we couldn’t do much in this budget. But we have increased our planned outlay for the education, health and social security sector, which will benefit the ‘aam aadmi’”.

Rising subsidy

Also, the state does not seem to be bothered about its rising subsidy bill. The total subsidy bill of the state is expected to go up from Rs 3,150 crore this year to Rs 3,500 crore next year. A majority of the sops will go as power subsidy to the farm sector, in the ‘atta-dal’ scheme and other social security schemes.

Kaur, however, justified these subsidies, saying as a welfare state the government’s focus has been on inclusive growth and development.