States’ deficit 3.1% of GDP: RBI

MUMBAI, February 4: The consolidated fiscal deficit of the state governments will be pegged at Rs 45,530 crore, that is, 3.1 per cent of the...

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MUMBAI, February 4: The consolidated fiscal deficit of the state governments will be pegged at Rs 45,530 crore, that is, 3.1 per cent of the gross domestic product (GDP) in 1997-98, said a study published by the Reserve Bank of India’s February 1998 bulletin “Finances of the state government.” In the corresponding period last year, the consolidated fiscal deficit was pegged at 3.3 per cent of the GDP at Rs 41,845 crore.

The aggregate revenue deficit of the state government for 1997-98 will be Rs 15,373 crore, which is 1.1 per cent of the GDP, marginally lower than last year’s Rs 15,855 crore1.3 per cent of the GDP.

The estimated fiscal deficit in 1996-97 will be financed to the extent of 47.6 per cent through loans from the centre and the remaining 52.4 per cent through states’ capital receipts.

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The expenditure of state governments in 1997-98 is expected to rise sharply on account of the implementation of the recommendations of the Fifth Pay Commission and other expenditures like interest payments,the bulletin said. The expenditure on administrative and general services is estimated to rise by 44.3 per cent and 66.4 per cent, while the expenditure on direct developmental activities will rise by 4.6 per cent, it said.

According to the bulletin, expenditure on energy and industry is likely to decline. The growth rate of outlay on social services will also decline to almost one-half of the 1996-97 level. Even growth in revenue expenditure during 1997-98 at Rs 1,91,551 crore is estimated to decelerate to 10.7 per cent as compared to 19.4 per cent last year. The non-developmental expenditure under revenue account will record a steep rise of 24.5 per cent mainly on account of pension, interest payment and administrative services.

The interest payment will go up 17 per cent from Rs 26,563 crore in 1996-97 to Rs 31,089 crore in 1997-98. RBI said that the high revenue deficit in 1997-98 has been primarily on account of UP, Tamil Nadu, WB, AP and Kerala.

These five states account for 85.6 % of theconsolidated revenue deficit of all states and the revenue deficit is estimated to decline substantially for certain states like Bihar, Gujarat and West Bengal, while it would increase for UP, AP and Tamil Nadu.

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In 1997-98, after including the estimated additional resource mobilisation (ARM) of Rs 1,013 crore, 17 state governments have revenue deficits ranging between Rs 7,696 crore (Uttar Padesh) to Rs 25 crore (Goa), it said.