In its report on state finances for the year ended March 31, 2023, tabled in the state Assembly on Friday, the CAG said the ratio of revenue deficit to fiscal deficit indicates the extent to which borrowed funds were utilised. for current consumption.
However, the persistently high ratio of revenue deficit to fiscal deficit indicates that the state's asset base is continually eroding and a portion of borrowings (fiscal liabilities) do not have any asset backing.
Although the budget exercise carried out by the state government must be more realistic as 18.19 per cent of the total provision remained unutilized, the total expenditure incurred during the year 2022-23 was six per cent less than the original budget and the supplementary budget. It constituted 15 percent of the original budget.
Supplementary grants/credits, as well as reallocations, were obtained without adequate justification, as large amounts remained unused.
With regard to fiscal sustainability risk, the CAG noted that the debt stabilization indicator is currently static rather than clearly rising.
“The debt stabilization indicator, consisting of quantum spread and primary deficit, decreased in the period (2019-21) and has since shown a gradual increase in the year post-pandemic, the CAG said.
The CAG said it has not yet reached a steady state for debt stabilization. Furthermore, the improvement in public debt relative to GSDP and overall liabilities relative to GSDP after the pandemic suggests that the debt situation is not deteriorating, but has not yet reached a threshold at which it can be concluded that Debt stabilization is on an upward trend.
The outstanding debt (fiscal liabilities) of the state increased from Rs 4,36,781.94 crore in 2018-19 to Rs 6,60,753.73 crore at the end of 2022-23. The outstanding debt/GSDP ratio of 18.73 per cent during 2022-23 was higher than the limits prescribed by the Fiscal Responsibility Budget Management (FRBM) Act (18.14 per cent).
Although the outstanding debt for the year 2022-23 remained close to the projections made under the medium-term fiscal policy, the nominal GSDP did not reach the projected levels. Therefore, the state could not achieve the targets set for the ratio of total outstanding liabilities to GSDP.
“Taken together, the committed and inflexible expenditure in 2022-23 was Rs 2,67,945.58 crore; 65.73 percent of income expenses. The upward trend in committed and inflexible spending leaves the government with less flexibility for other priority sectors and capital creation,” the CAG said.
The CAG has made a number of suggestions, including that the Government could consider mobilizing additional resources through tax and non-tax sources to move towards a revenue surplus state.
The government can take steps to ensure better value for money in investments. Otherwise, funds borrowed at high cost will continue to be invested in projects with low financial returns.
The state government needs to monitor and manage its debt levels to ensure long-term fiscal stability by taking corrective measures to rationalize expenditure, explore new sources, broaden the revenue base and invest in revenue-generating assets.
Further, the CAG has emphasized that the state government should formulate a realistic budget based on reliable assumptions considering the needs of the departments and their capacity to utilize the allocated resources.
“The government should institute an appropriate control mechanism to enforce proper implementation and monitoring of the budget to ensure that savings are reduced, large savings within the grant/allocation are monitored and anticipated savings within the budget are identified and delivered. specified period. All cases of pending regularization of excess expenditure over budgetary provision should be given priority,” the CAG said.
However, the persistently high ratio of revenue deficit to fiscal deficit indicates that the state's asset base is continually eroding and a portion of borrowings (fiscal liabilities) do not have any asset backing.
Although the budget exercise carried out by the state government must be more realistic as 18.19 per cent of the total provision remained unutilized, the total expenditure incurred during the year 2022-23 was six per cent less than the original budget and the supplementary budget. It constituted 15 percent of the original budget.
Supplementary grants/credits, as well as reallocations, were obtained without adequate justification, as large amounts remained unused.
With regard to fiscal sustainability risk, the CAG noted that the debt stabilization indicator is currently static rather than clearly rising.
“The debt stabilization indicator, consisting of quantum spread and primary deficit, decreased in the period (2019-21) and has since shown a gradual increase in the year post-pandemic, the CAG said.
The CAG said it has not yet reached a steady state for debt stabilization. Furthermore, the improvement in public debt relative to GSDP and overall liabilities relative to GSDP after the pandemic suggests that the debt situation is not deteriorating, but has not yet reached a threshold at which it can be concluded that Debt stabilization is on an upward trend.
The outstanding debt (fiscal liabilities) of the state increased from Rs 4,36,781.94 crore in 2018-19 to Rs 6,60,753.73 crore at the end of 2022-23. The outstanding debt/GSDP ratio of 18.73 per cent during 2022-23 was higher than the limits prescribed by the Fiscal Responsibility Budget Management (FRBM) Act (18.14 per cent).
Although the outstanding debt for the year 2022-23 remained close to the projections made under the medium-term fiscal policy, the nominal GSDP did not reach the projected levels. Therefore, the state could not achieve the targets set for the ratio of total outstanding liabilities to GSDP.
“Taken together, the committed and inflexible expenditure in 2022-23 was Rs 2,67,945.58 crore; 65.73 percent of income expenses. The upward trend in committed and inflexible spending leaves the government with less flexibility for other priority sectors and capital creation,” the CAG said.
The CAG has made a number of suggestions, including that the Government could consider mobilizing additional resources through tax and non-tax sources to move towards a revenue surplus state.
The government can take steps to ensure better value for money in investments. Otherwise, funds borrowed at high cost will continue to be invested in projects with low financial returns.
The state government needs to monitor and manage its debt levels to ensure long-term fiscal stability by taking corrective measures to rationalize expenditure, explore new sources, broaden the revenue base and invest in revenue-generating assets.
Further, the CAG has emphasized that the state government should formulate a realistic budget based on reliable assumptions considering the needs of the departments and their capacity to utilize the allocated resources.
“The government should institute an appropriate control mechanism to enforce proper implementation and monitoring of the budget to ensure that savings are reduced, large savings within the grant/allocation are monitored and anticipated savings within the budget are identified and delivered. specified period. All cases of pending regularization of excess expenditure over budgetary provision should be given priority,” the CAG said.
