The state budgets for 2011-12, tabled in their legislatures since early February, indicate that because of the pick up in the economy, the states have refocused on fiscal consolidation. The more innovative have initiated new strategies for raising resources outside state budgets to fund infrastructure investments and further accelerate growth.
The fiscal numbers clearly show how the states? gains are already much ahead of the Centre?s. While the central government has struggled to push down the revenue deficit from 5.2% of GDP in 2009-10 to 3.4% in 2010-11 and maintain it at that level for the coming fiscal, states have already scaled down the revenue deficit from 0.8% in 2009-10 to 0.4% of GDP in the budget estimates for 2010-11.
Now, the initial numbers for 2011-12 are even more encouraging. Budget estimates from almost a dozen states show that major states like Uttar Pradesh, Karnataka, Bihar, Andhra Pradesh and Kashmir continue to maintain a surplus on the revenue account, even while others like Gujarat, Rajasthan and Orissa, are all set to turn this year?s deficit into a surplus next year. In fact, the available numbers, so far, show that among major states, only Haryana and Kerala have sustained the revenue deficits into the coming year. The continued efforts to shrink the deficit have ensured that the fiscal deficits of almost all states now remain below 3% of GDP.
Apart from the shrinking revenue deficits, the other numbers on revenue collections and expenditure also corroborate the states? emphasis on fiscal contraction and balanced budgets. For instance, the numbers on revenue and expenditure growth targeted in the state budget for 2011-12 indicate that many of the states have ensured that the targeted expenditure growth is much lower than the growth of taxes and total revenues. Most prominent in the category are Bihar, Gujarat, Haryana and Kashmir.
While the Bihar budget has projected tax collections to go up by 18.3% and total revenue receipts to surge by 21.3%, they have restrained the state expenditure growth to just 11.2%. Similarly, in Haryana, while the tax collections are projected to increase by 15.9% and total revenue by 16.1%, the expenditure bill of the government is projected to grow by a far lower 10.1%. However, the overall expenditure growth projected for 2011-12 varies widely across states, from a low of 9.2% in Gujarat to a high of 23.6% in Kerala.
What is more notable are the new strategies adopted by some of the more innovative states to stimulate investment and growth, especially in the infrastructure sector, of which Karnataka, Kerala and Gujarat are examples. With the growth rate in Karnataka picking up from 3.7% in 2008-09 to 8.2% in 2010-11, the government has stepped up the pace of infrastructure projects, especially through the PPP route. The state now has an impressive record of pursuing as many as 91 projects involving a total investment outlay of R67,792 crore. Further, Karnataka is also contributing as much as 50% of the cost of 16 railway projects in the state.
In Kerala, the focus of the state budget is on improving the road network at a cost of around R40,000 crore. The state plans to fund the programme not through government borrowing but through autonomous companies controlled by the government, which would raise loans and rebuild the road network. For this, three to six months of revenue from the motor vehicles? tax every year is to be deposited in an escrow account through legislation. The companies would also raise additional funds from advertisements and land development.
The other major ambitious infrastructure project in Kerala is the North-South Super-fast Rail Corridor over 500 kms costing around R50,000 crore. Though the business model for raising funds is yet to be decided, the Delhi Metro is conducting the feasibility study and the state budget has also allotted funds for a detailed project report.
In fast industrialising Gujarat, which can give China a run for its money, the focus is on a ?Green Energy Fund?, which will be financed by levying a green cess at the rate of two paise per unit on non-renewable electrical energy, including captive energy. The proceeds of the fund will go for funding the purchase of non-conventional energy and for the protection of the environment.
In fitting reflection of the growing economic clout of the state, the state?s 12th Plan outlay will touch R1,27,653 crore, which is around 15% higher than the total plan target of R1,11,111 crore.
Two notable social security schemes announced in the state budgets for the next year are the free cycle to girl student in Rajasthan and the gift of a fixed deposit of R10,000 for every child born in Kerala. Following the examples set by Bihar and Orissa, the Rajasthan state budget has now made allocations for distribution of 1.42 lakh cycles to the girl students in rural areas studying in class IX and X. The R10,000 fixed deposit in Kerala, along with the accumulated interest and principal, is to be made available to the child to avail of a bank loan linked support for higher studies, skill development training or self-employment after plus two.
?p.raghavan@expressindia.com