State badly needs greater support from Centre

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Last Updated 05 March 2022, 01:48 IST

The Budget is realistic in terms of revenue projections of tax and non-tax, their growth and the deficits. The tax and non-tax revenue growth is good and has the potential to improve.

The growth of own-tax revenue has been on a decline and in the current year (2021-22), it has grown by 15% and is expected to grow at 14% in 2022-23 at Rs 1,26,883 crore. The non-tax revenue is increasing steadily and is expected to increase by 14% this year and 22% in the year 2022-23, which seems achievable.

The GST compensation has been pegged at Rs 5,000 crore for the year 2022-23 considering the fact that it is likely to end by June 2022. The share of taxes and grant-in-aid from GOI has barely grown at 4% average for the period 2016-17 to 2021-22 indicating no real increase.

The share of the taxes from the Government of India has reduced from earlier 4.713% to 3.647% adding to the decline. The share of borrowings has become a big part of the receipts of the government and has increased from 15% in the 2015-16 to 35% in 2020-21 and this is expected to be at 27% for the year 2022-23.

After a fairly long time, revenue surplus was replaced by revenue deficit in 2020-21 and was Rs 19,337 crore, accounting for about 1.07% of the GSDP. The fiscal deficit also jumped from 2.25% during 2019-20 to 3.72% in 2020-21 and is expected to be 3.26% for 2022-23.

The decline was already there before the pandemic and the recovery may take longer than expected.

The Medium-Term Fiscal Plan 2022-26 indicates a steady decline in the ratio of revenue receipts to GSDP from 11.01% for the year 2021-22 to 8.87% for the year 2025-26 whereas the ratio of debt-to-GSDP is likely to increase.

The growth needs to be sustained by making the best use of the borrowings to enhance capital expenditure. Towards this, the fiscal deficit of 3.26% could have been increased to the limit of 3.5% to enhance the capital expenditure and that would
have been a very prudent measure.

The state is doing its best and badly needs greater support from the Government of India. The most prudent way for the Government of India is to support the economically stronger states like Karnataka, Maharashtra, Tamil Nadu to lead the economic recovery which has been severely affected due to changing from VAT regime to GST regime.

(The author is a senior research adviser at Centre for Budget and Policy Studies)

(Published 04 March 2022, 17:12 IST)

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