Bangalore, 22 August 2011: Even as the State Government paints a rosy picture of its finances, the statistics tell a different story. The total debt stock of the government has been inching towards Rs one lakh crore due to borrowing spree by successive dispensations.
The total debt stock of the State during the financial year 2010-11 stood at an estimated Rs 92,962 crore. The dues include Rs 10,540 crore to the Central government, open market borrowings of Rs 31,500 crore and Rs 22,439 crore availed from LIC, NABARD and other financial institutions. The annual finance statement for the year 2011-12 pegs the public debt for the fiscal year at Rs 15,353 crore.
Given the present financial health of the State, the Government has no option but to go in for more borrowings to fund its populist schemes, mounting subsidies, raising salary and pension bills.
Of the revenue expenditure of Rs 59,647 crore for the year 2011-12, a staggering sum of Rs 27,392 crore goes towards interest payment, salaries and pension (Interest payment: Rs 7,923 crore; salaries: Rs 18,034 crore; pensions: Rs 6,570 crore). This apart an additional Rs 10,063 crore has been estimated to go towards debt servicing.
Finance department officials point out that total liabilities of the State government are within limits. The argument is that the fiscal deficit was 2.16 per cent of the State GDP during 2004-05.
The Central government allowed the state governments to rise the fiscal deficit up to 3.5 per cent in 2008-09 and four per cent in 2009-10. However, the ratio has been pegged at 2.89 per cent in the State.
Saving grace
Buoyant tax collection has turned out to be a saving grace for the government. The State has clocked an average growth of 26 per cent in tax revenue. The departments of commercial taxes, excise, motor vehicle and stamps and registration have proved to be major revenue grossers.
The State would have plunged into a debt trap but for the splendid performance by these departments.
The Medium Term Fiscal Plan for 2011-15 has projected the total debt stock in the state would cross the Rs one lakh crore mark (Rs 1,01,196 crore) in 2011-12. The State Expenditure Reforms Commission (SREC), has strongly recommended the Government contain public debt and enhance productive expenditure to achieve a long-term economic growth.
The Commission headed by former chief secretary B K Bhattacharya, in its second report submitted to the Finance Department recently, has felt the need to enhance productive expenditure, particularly on economic infrastructure, urban development, energy and skill development.
The panel has suggested the Government to increase the share of developmental expenditure in social priority sectors like elementary education, rural health, public health, water supply and sanitation.
Appraisal of projects and schemes with investment of above Rs five crore and social cost-benefit analysis of infrastructure projects above Rs 10 crore are the other recommendations of the panel.