The state of state finances: Despite a predicted shortfall, a positive future for certain states

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Updated: April 24, 2018 4:43:45 AM

A report released by ICRA on Monday, detailing the cash flows of 13 states (Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Haryana, Kerala, Maharashtra, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh and West Bengal), revealed that March 2018 will have a lot of shortfall to cover up, if revised estimates (RE) of the FY18 budgetary estimates are to be matched.

state finances, ICRA, collection of GST, revenue expenditure, fiscal deficit, Andhra Pradesh, Bihar, Chhattisgarh, GujaratThe FY19 budget estimates (BE) of the 13 states have forecast a higher growth of their revenue receipts (14.4%) relative to their revenue expenditure (10.6%).

Yash Budhwar

A report released by ICRA on Monday, detailing the cash flows of 13 states (Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Haryana, Kerala, Maharashtra, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh and West Bengal), revealed that March 2018 will have a lot of shortfall to cover up, if revised estimates (RE) of the FY18 budgetary estimates are to be matched. The collective data of 13 state governments, in ICRA’s report, indicates a strong expansion of 21.3%, 20.8% and 13.2%, respectively, for revenue receipts, revenue expenditure and capital outlay in the RE for FY18.

However, the interim data for April-February FY18, released by the Comptroller and Auditor General of India (CAG), for these state governments indicates a relatively passive performance, with a growth of 11.2% and 10.2%, respectively, for revenue receipts and revenue expenditure, and 8% contraction of capital outlay. For the shortfall to be met, there needs to be upwards of 60% point changes in each of revenue collections, capital outlay and revenue expenditure, in March of this year, than what was observed in March of last year, thus making the achievement of the required numbers highly unlikely, according to ICRA.

The FY19 budget estimates (BE) of the 13 states have forecast a higher growth of their revenue receipts (14.4%) relative to their revenue expenditure (10.6%). As a result, these states have projected a quick improvement in their revenue deficit to Rs 143.6 billion in FY19 BE, from Rs 733.4 billion in FY18 RE. In spite of budgeting for a healthy 17.1% growth of their capital outlay in FY19, these states have forecast a mild decline in their fiscal deficit to Rs 3.5 trillion in FY19 BE, from Rs 3.7 trillion in FY18 RE.

Thus, this improvement remains dependent on meeting the budgeted growth in revenue receipts and limiting the expansion in revenue expenditure. In turn, this will depend on the rate of collections of SGST by each of these states, and the compensation for the collection of GST that is received from the Centre, both of which are expected to increase for the states in question for which data is available. The meeting of the budgeted state fiscal deficit targets will also provide much needed breathing room for the Centre in a year in which expenses might be on the higher side due to the upcoming elections, and for the reduction of fiscal deficit.

yash.budhwar@expressindia.com

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