The Telangana Government has requested the Centre to recalculate the Gross State Domestic Product in accordance with the recommendations of the Finance Commission.
“The Centre apparently adjusted the GSDP figures. But it is not what the Finance Commission has recommended and it is a departure from the old practice. The GSDP figures are released by the Central Statistical Organisation and it is better to stick to those figures,” sources said.
Normally the GSDP for the new financial year 2016-17 is estimated based on the GSDP of the last financial year (2015-16), which was Rs.5.83 lakh crore plus, with at least 10 per cent growth projections for the new fiscal. However, Centre apparently downsized the growth projections to way below 10 per cent. The Union Cabinet, which met on Wednesday, took a decision enhancing the Fiscal Responsibility and Budget Management (FRBM) limit from three to 3.5 per cent of GSDP with regard to States which fulfilled the three conditions stipulated by the 14{+t}{+h}Finance Commission . Two of the conditions are that the debt to GSDP ratio of a State should not exceed 25, the interest payments of a State should not exceed 10 per cent of its total revenue receipts. Fulfilling these conditions will make a State eligible for 0.25 per cent hike under each clause. But to avail the benefit of enhanced FRBM, the State should also have surplus funds in the current year (2016-17) as well as the preceding year (2015-16). Of the 29 States in the country, Telangana along with six to seven others including Gujarat and Karnataka became eligible for higher FRBM limit of 3.5 per cent of GSDP.
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As the Centre earlier communicated to the State that its FRBM was fixed at 3 per cent of GSDP would be now issuing a revised communication enhancing the limit to 3.5 per cent to facilitate Telangana to borrow an additional Rs.3,000 crore, sources explained. Anticipating the hike, the figure was already factored in the budget statement for 2016-17.
However, the hitch is the way Centre calculated the GSDP. If the Centre agrees to go by the Finance Commission recommendations for calculating the GSDP, the figure will be higher and accordingly Telangana can borrow more than Rs.3,000 crore additionally, they said.
It will benefit State further with hiked FRBM limit