The slump in the national economy is likely to affect the State’s finances in the coming years.
When Finance Minister D. Jayakumar presents the State budget for 2017-18, the revenue deficit is likely to be ₹16,000 crore and the fiscal deficit over ₹40,000 crore.
While the State government is a long way from achieving revenue surplus again — the last time it achieved the surplus was in 2012-13 — the Fiscal Deficit to GSDP ratio is likely to breach the 3% mark as per the Fiscal Responsibility and Budget Management Act (FRBMA). The ratio is estimated at 3.34% in 2017-18 as the State government has to take over the loans of Tangedco after joining UDAY scheme, say officials.
When the State implements the Seventh Pay Commission recommendations, the Fiscal Deficit — GSDP ratio will again go above 3%. The last pay commission report was implemented in 2009-10 and the present government has now constituted a committee to study the Seventh Pay Commission to bring parity and it could take a year or two to implement its recommendations.
In 2017-18, the outstanding debt is estimated at ₹2.52 lakh crore, constituting 18.43% of the GSDP, and not a major concern, say officials. What is of concern is the fall in State’s Own Tax Revenues (SOTR), constituting 61.2% of the revenue receipts, for the past four years. The significant fall in SOTR, particularly in Commercial Taxes, reduced share in Central devolution and Centrally sponsored schemes will add to the strain on the State’s finances.
As per the revised estimates, the growth rate of commercial taxes, excise duty, stamp duty, registration fee and motor vehicle taxes all grew in single digits in 2016-17 compared to the previous year. The SOTR grew by a mere 4.80%.
The year 2016-17 registered growth in two digits — only on the expenditure side, under two categories, interest payments, subsidies and grants. Overall, the expenditure grew by 10.99%, when the SOTR was falling drastically, affecting the fiscal balance.
“There are two ways to reduce the fiscal deficit. Either increase revenue or reduce expenditure. The recent hike in VAT on petrol and diesel shows the urgency of the government in raising the revenue,” says Prof. R. Srinivasan, Department of Econometrics, University of Madras.
