Despite high debts, Rajasthan hopes to soon have a silver lining
By Archana Sharma
Jaipur, Feb 27 (IANS): Rajasthan has joined the list of states whose debts hover around a precarious level of 40% of state gross domestic product (GSDP). However, government officials say the state’s fiscal responsibility and budget management (FRBM) has remained below the allowable limit and hence a silver lining will soon be visible.
According to Brijesh Kishore Sharma, Director (Budget), Government of Rajasthan, “The FRBM in Rajasthan remains below the allowed limit. had not been there , revenue and budget deficits will not have increased. We have to pay interest of about Rs 8000 crore on the loans we have taken. This is one of the main substantive reasons for the increase in deficits. Then COVID was one of the main reasons for the decline in income and increase in expenses. However, despite this pandemic challenge, we have kept the FRBM below the authorized limit. In normal times, the government kept it at 3%, then the government increased it during the pandemic and so we are under the authorized limit at 4.5.”
In the times to come, we can see a silver lining with the return to normality. The impact of the virus is diminishing and therefore a revival of the economy is expected soon, he added.
The state government recently presented its annual budget.
According to this budget announcement, “the estimated budget deficit stands at Rs 58,000,211 crore 55 lac, or 4.36% of GSDP”.
The budget document states: “Fiscal variables (without COVID-19 effect) of the state’s gross domestic product in 2020-21 touched 3.20% while the debt and other liabilities of the state’s gross domestic product in 2020-21 were 40.51%”.
He adds that “the budget deficit remains almost in line with the standards of the FRBM law of 2005.
“If the effect of additional borrowing is excluded, the budget deficit (without the COVID-19 effect) remains at 32,468 crore, or 3.20% of 37,654 crore (3.77%) for the year 2019- 20. Thus, the budget deficit remains almost in touch with the standards of the FRBM Act of 2005,” states the Economic Review 2021-22 document published by the state government.
In 2017, the FRBM panel proposed a ceiling for general government debt (Center and States) of 60% of GDP by FY23. And within this overall limit, a ceiling of 40% was retained by the Centre, and 20% by the States. However, Rajasthan is among the states whose overall debt reached a 15-year high of 31.3% of GDP in FY21 and appears to be around the same level in FY22. .
The respective budget estimates suggest that the states with the highest debt to GSDP ratio in FY22 are Punjab (53.3%), Rajasthan (39.8%), West Bengal (38.8 %), Kerala (38.3%) and Andhra Pradesh (37.6%).
BJP State Chairman Satish Poonia told IANS: “Rajasthan’s debt has steadily increased under the Congress government due to financial mismanagement. It has, in three years, increased by Rs 4.34,000,000,000; each person in the state is granted a loan of Rs 52,000.”
“Ashok Gehlot’s government alone has taken 25% of the loans taken by all other governments over the last thirty years, which affects the governance of the state.”
Speaking on the latest budget, he said: “The debt to GDP ratio has increased to 59.03%. In addition, the budget deficit has increased to 4.36%, which violates the FRBM limit of 3%.
The primary deficit has increased over the years. The state has failed in budgetary discipline and the management of public finances. The interest payment has increased to Rs 28,83,811 lakh, which is about 10% of the total expenditure of Rs 2,38,46,579, which is cause for serious concern, he added.