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State finances chinning up: Survey

The Survey asked states to impose proper user charges, cut losses of state PSUs, bring down interest and pension bills.

india Updated: Feb 27, 2006 15:14 IST

With a significant 14.4 per cent jump in revenues after Value Added Tax, the Economic Survey asked states to impose proper user charges, cut losses of state PSUs, bring down interest and pension bills to reduce deficits further.

Patting states for cutting the combined fiscal deficit sharply to 3.1 per cent in 2005-06 from four per cent in 2004-05, the Survey said: "With the 12th Finance Commission's (TFC) debt consolidation and write-off scheme in place, the position might improve further."

While most of the indicators of state finances show a "somewhat improved picture", the survey presented to Parliament outlined the need to address the causative factors that was deteriorating their fiscal situation including the growing interest and pension burden, losses of state PSUs, absence of proper user charges and lack of buoyancy in taxes.

With the successful implementation of VAT by 25 states and UTs and the TFC incentive to enact FRBM legislations, it said "the deepening of state level reforms contributed to the foundations of fiscal reform and their sustainability."

Following the TFC award, which mandates a quantum jump in grants-in-aid, the revenue deficit of states is slated to come down from 1.4 per cent of GDP to 0.7 per cent this fiscal.

However, the survey pointed out that the outstanding liabilities of states are pegged at Rs 11,52,530 crore (or 32.7 per cent of GDP) this fiscal compared to Rs 10,40,834 crore (33.3 per cent of GDP) in 2004-05.

The silver-lining was the whopping 14.4 per cent increase in revenues in the first seven months of VAT introduction this fiscal.

First Published: Feb 27, 2006 15:14 IST