Rising debt burden of States

By Our Special Correspondent

MUMBAI, DEC. 20. The overall borrowing requirements of State governments that reflect the extent of resource gap in State finances have increased from a mere Rs. 18,787 crores in 1990-91 to Rs. 94,739 crores in 1999-2000, recording a decadal average growth of 21.2 per cent and is budgeted at Rs. 90,092 crores in 2000-01.

In terms of GDP, the combined GFD (gross fiscal deficit) rose from 3.3 per cent in 1990-91 to 4.9 per cent in 1999-2000, revealing the persisting fiscal imbalances of the States arising out of the gap between revenue receipts and expenditure obligations in existence since the mid-1980s. This trend in revenue expenditure mismatch was furthered during the 1990s; with the average growth in revenue receipts at 14.4 per cent falling short of growth in expenditure at 15.6 per cent, an inevitable outcome of deviations between final budgetary outcomes vis-a-vis original projections of receipts and expenditures in the budget estimates.

``Poor marksmanship brings to the fore the issue of credibility in the announcements about fiscal corrections that governments often make,'' stated a study conducted by the Reserve Bank of India on State Finances. The expenditure overruns stem largely from the persistent rise of committed revenue expenditures. At the same time, the persistent increase in consumption expenditure defrayed towards administrative services (wages, salaries and pensions) continues to be a major contributing factor to the deviations in budgetary outcomes. This is clearly brought out in the economic and functional classification of the State budgets.

Besides, the pattern of expenditure has also affected the quality of expenditure as reflected by a persistent rise in non- developmental expenditure with corresponding deceleration in the growth of developmental expenditure. It is well recognised that while the thrust of expenditure restructuring should be on rationalisation, there is also need for prioritisation of expenditures.

PTI reports:

The interest payments burden has grown from 13 per cent of revenue receipts in 1990-91 to as high as 21.2 per cent in 1999- 2000 and would further rise to 22.2 per cent in the current fiscal, it added.

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