Even as the Centre is showing signs of missing the target of 4.6% fiscal deficit for 2011-12, Uttar Pradesh has a reason to cheer.

Despite the pressure of Sixth Pay Commission implementation, increased allowances, and the recent global slowdown and its accompanying crisis, the state has managed to bring its fiscal deficit to a manageable 3% of the gross domestic product (GSDP).

Under the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, the fiscal deficit was to be brought to 3% of the GSDP by March 2008. Uttar Pradesh?s fiscal deficit as a percentage to GSDP, which had gone up to 4.7% in 2008-09, has been brought down to 3% in 2010-11. The target set for 2011-12 is 2.9%.

The state?s outstanding debt, in proportion to GSDP, has been steadily declining from 42.7% in 2007-08 to 32.1% in 2011-12, while the own tax revenue (OTR) has also grown from R24,959 crore in 2007-08 to around R50,334 crore in 2011-12, recording an impressive growth rate of 22% in the last two years consecutively. The reasons for this performance are improved tax collection, reduction in unproductive expenditure and better financial management.

The FRBM Act aims to eliminate revenue deficit of the country and bring down the fiscal deficit to a manageable 3% of the gross domestic product (GDP) by March 2008. However, in the wake of the economic downturn in 2008, the deadline has been regularly extended. But, earlier this year, in his Budget speech, finance minster Pranab Mukherjee had said that the government would introduce an amendment to the Act to chalk out a fiscal roadmap for the next five years.

In 2010-11, the Centre’s original estimate of fiscal deficit was 5.5% of GDP, but it was reduced to 5.1% in the revised estimates. But the actual figure turned out to be close to 4.7%. During this fiscal, the government aims the 4.6% target.

Former finance secretary and now Uttar Pradesh chief secretary Anoop Mishra said the state?s contribution in the centrally sponsored schemes, scholarships and the increasing liabilities of rural local bodies left little scope for the state to come out with ambitious schemes. ?UP?s initiative to grant higher wages to its employees according to the Sixth Pay Commission in 2007-8 and clearing up the arrears has been a daunting task,? he said.

Uttar Pradesh has pegged its Plan size at R47,000 crore for the current financial year as against R42,000 crore last year.