Waseem Ahmad BhatAIR 7 · CSE 2022 · 228 wordsTheir whole copy
Opening · a date or context
Recently RBI published a report on state finances where it analysed the state budgets of 2020-21 and presented worrying finds.
Body · points
→ Key trends
⊙ Increase in fiscal deficit to around 4.1% now from around 3% earlier (FRBM limit = 3%)
⊙ Debts have increased and crossed the FRBM Committee mark of 20% and reached 25% mark → Debt unsustainability
⊙ Market borrowings have increased and reached to 63% of all borrowings.
⇒ Issues & Concerns
⊙ Whatever decrease in fiscal deficit has happened is because of reduction in development/capital expenditure & increase in revenue expenditure.
→ 9 out of 13 states have done less capital expenditure than provided in budgets.
⊙ Increase in populist tendencies
e.g: loan waivers, DISCOM problems, etc.
⊙ less revenue receipts
→ Around 10% less revenue expenditure than budgeted.
Close · a summary
⇒ Measures needed
⊙ Strict implementation of State FRBM Acts
⊙ Build an independent fiscal council (N.K. Singh Committee) to keep them accountable.
⊙ Provide more untied grants (currently only at ≃ 30% of Gross tax revenue) as given in 15th finance commission from centre.
⊙ Focus on debt sustainability.
⊙ As Tarapore committee has provided, focus on provision of Public sector financial resources (PSFRs) rather than fiscal deficit.
State finances are important as they do 60% of the expenditure & employ 5 times as many as centre. Hence, they need to be made sustainable.
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