Bihar budget: Fiscal deficit to be near 4% due to Covid-19 induced borrowings

The state government has already borrowed ₹26,000 crore till January this fiscal as against the target of ₹28,000 crore.

With the internal revenue collections and central devolutions dipping in this fiscal year owing to economic contraction due to Covid-19 pandemic, the Bihar government’s fiscal deficit for 2020-2021 is set to increase and hover around the 4% mark of the state gross domestic product (SGDP), said officials.

Deputy chief minister Tarkishore Prasad is also the Bihar finance minister (PTI)

The Nitish Kumar government, which is giving the final touches to the state budget, is hoping to cap the deficit around 4%, well within the permissible borrowing limit of 5% of SGDP-- allowed by the Centre in May last to give states more leeway in meeting their financial needs due to Covid induced lockdown and financial constraints.

The Centre had allowed states to increase the borrowing limit by 2% above the 3% of GSDP under the FRBM (fiscal responsibility budget management act), by putting in certain unconditional and conditional criteria in the additional borrowing limit.

“The deficit will increase as the borrowings have increased with less flow of internal revenue against the targets as well as the central devolutions. But it would not be more than 4% and could be even capped at 3.5% of SGDP this fiscal year. The assessment is still going on,” said an officer in the finance department on condition of anonymity.

The state government has already borrowed ₹26,000 crore till January this fiscal as against the target of ₹28,000 crore, owing to the dip in internal revenue and devolutions. There are projections that the internal revenue target of ₹39,900 crore would fall short by ₹9,000 to ₹10,000 crore.

This year’s budget outlay is expected to be around ₹2.15 lakh crore with chances of enhancement in the non-plan (committed expenditure) outlay with no marginal hike in the annual schemes( plan outlay) given the fund deficit.

The deputy chief minister Tarkishore Prasad, who is also the finance minister, held discussions with Bihar Chamber of Commerce, Bihar Industries Association, other business bodies and stakeholders as part of pre-budget consultations on Wednesday. The business bodies have given suggestions in relation to taxation, tweaking rules in taking input tax credit (ITC) under GST, simplifying the VAT forms and also reducing the road tax.

Meanwhile, principal secretary finance, S Siddharth said the fiscal deficit would be kept well within the permissible limit as the cap has already been increased. “Even if the deficit is four percent, it would be in the permissible limit. We cannot go beyond the limit as the deficit limit is guided under an act,” he said.

Incidentally, the finance department official said the state budget would show revenue surplus as like previous years indicating the fiscals in terms of meeting its commitments and other operational expenses are good. The state budget will be laid in the state assembly on February 22 during the budget session beginning February 19.