Upcoming Budget presentation in Haryana: Revenue deficit, debt burden sore points in economy
A revenue surplus state till 2008–09, Haryana has consistently been in deficit since then. It appears to be fiscally worst off in its class with very high trend growth rate of expenditures particularly interest payments and salaries and a huge debt burden primarily due to the power sector. These red flags about Haryana’s state of finances were raised by the 15th Finance Commission in its report tabled last month in Parliament.
The observations are important keeping in view the presentation of budget estimates for 2021-22 fiscal by Chief Minister, ML Khattar later this month.
The finance commission said that Haryana’s outstanding debt has been increasing at a trend growth rate of 20.2% between 2011–12 and 2018–19. The debt–gross state domestic product (GSDP) ratio also increased from 18.33% in 2011–12 to 25.09% in 2018–19.
RD-FD ratio increasing
The state’s revenue deficit-fiscal deficit ratio has been increasing over time and is currently 51.4% (2018–19) indicating that most of the state’s borrowings have gone for financing its revenue deficit, the report said.
Subsidy, as per the finance commission, constituted around 12% of the total revenue expenditure with power subsidy alone accounting for 87% of the total subsidies. Interest payments are also a huge liability for Haryana. “Between 2011–12 and 2018–19, interest as a percentage of total revenue expenditure has been in the range of 12.5% to 17.6% which is among the highest in the country,” the commission said.
“Social security and welfare constituted about 10% of total revenue expenditure with a significant part going to over 25 lakh pensioners under various flagship schemes for the elderly, widows, persons with disabilities. Despite high per capita income, Haryana has a consistently adverse sex ratio and high incidence of anaemia. Yet, health expenditure is only 4.8% of the total revenue expenditure. The pandemic apart, availability of health infrastructure and healthcare professionals in the state is hardly enough to meet its regular needs,’’ the Commission said.
‘Require balance between revenue and capital expenditure’
Chief minister ML Khattar, who holds the finance portfolio, said that payment of salaries, pensions coupled with implementation of the 7th Pay Commission has put a burden on state’s finances. “We have to strike a balance between the revenue expenditure and capital expenditure. The revenue expenditure is a committed liability and not much can be done about it.’’ Khattar said.
The CM said that state debt is within the 25% limit of the GSDP as mandated by Fiscal Responsibility and Budget Management (FRBM) Act. “At present, its 22.8 %. Under FRBM Act, loans up to 3% could be taken. But this year, the Central government had raised the limit 5%,’’ Khattar said.
Finance officials said that debt had increased due to the fact that state government took over the huge debt of power distribution companies.
As per the finance commission, the state government took over ₹25,950 crore debt of power distribution companies during 2015–2017 in the form of grants of ₹7,785 crore, loan of ₹15,570 crore and equity of ₹2,595 crore under the Ujjawal Discom Assurance Yojana (UDAY). Further, the loan was converted into equity in 2017-18 and 2018-19.
‘Our GSDP increased two-fold in last six years’
Khattar said that Haryana’s GSDP saw a two-fold increase in the last six years of BJP rule. When the Congress rule ended in 2014-15, our GSDP was ₹3.99 lakh crore. It has increased to ₹8.58 lakh crore now,’’ he said.
The finance commission though has remarked that intra-state disparity between the most advanced district (Gurugram) and the most backward (Nuh) is staggering. “Without Gurugram in the equation, Haryana’s GSDP and per capita income would reduce drastically,’’ the commission said.