State Fi­nances Both Im­prove, De­te­ri­o­rate

The qual­ity of spend­ing is a source of con­cern

The Economic Times - - The Edit Page -

A Re­serve Bank of In­dia (RBI) re­port on state fi­nances reveals fis­cal con­sol­i­da­tion ac­com­pa­nied by “mod­estly im­proved” qual­ity of bud­geted ex­pen­di­ture. The good news is that there is no­table im­prove­ment in the ra­tio of de­vel­op­ment ex­pen­di­ture to gross state do­mes­tic prod­uct (read: out­put) in the low-in­come states. The bad news is that as per the 2015-16 state bud­gets, there has been a de­cline (over the pre­vi­ous year) in pro­jected rev­enue ex­pen­di­ture un­der such im­por­tant heads as hous­ing, wa­ter sup­ply and san­i­ta­tion, ru­ral de­vel­op­ment, ir­ri­ga­tion and flood con­trol, etc. Cap­i­tal ex­pen­di­ture is bud­geted to de­cel­er­ate as well.

The RBI re­port men­tions that the in­crease in the states’ share of tax devo­lu­tion from 32% to 42% of the di­vis­i­ble pool, on the rec­om­men­da­tion of the Four­teenth Fi­nance Com­mis­sion, ac­tu­ally works out to a de­cline in cen­tral trans­fers (share in cen­tral taxes plus grants-in­aid) by 0.3% of GDP in 2015-16, due to dis­con­tin­u­ance of many cen­trally spon­sored schemes. While many such schemes on state sub­jects have been delinked from cen­tral sup­port, those rep­re­sent­ing na­tional pri­or­i­ties like poverty al­le­vi­a­tion, and those backed by cess, do con­tinue. The re­port adds that the states need to pro­vide greater fis­cal space for de­vel­op­ment ex­pen­di­ture on health and ed­u­ca­tion by aug­ment­ing rev­enue gen­er­a­tion, levy­ing rea­son­able user charges, boost­ing per­for­mance of state pub­lic sec­tor units and, in par­tic­u­lar, by im­prov­ing re­al­i­sa­tions from state power dis­tri­bu­tion util­i­ties.

Power util­ity fi­nances call for greater fo­cus and trans­parency. Note that the RBI re­port is only able to pro­vide woe­fully dated fig­ures. It says ag­gre­gate tech­ni­cal and com­mer­cial losses in power dis­tri­bu­tion have come down from 26.4% in 2010-11 to 22.7% in 2013-14, but pro­vides no up­date. With­out thor­oughly im­proved power util­ity fi­nances, which need to be pub­lished on a quar­terly ba­sis, state fi­nances are bound to de­te­ri­o­rate. A ma­jor pub­lic fi­nance chal­lenge to tackle pop­ulism and po­lit­i­cally man­dated power tar­iffs and give­aways.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.