Finance minister P. Chidambaram with Bharat Chamber of Commerce president Santosh Rungta in Calcutta on Friday. Picture by Kishor Roy Chowdhury

Calcutta, Nov. 11: While mildly praising Bengal government’s new-found industrial zeal, finance minister P. Chidambaram today warned the state of the fiscal mess and emphasised the urgent need to adopt the Fiscal Responsibility and Management Act, as suggested by the 12th Finance Commission for furthering growth.

“A few years ago, I would have come to the city with great trepidation, but now I find kindred souls here who share our intellectual kinship,” said Chidambaram.

“Now the city speaks a different language and there are activities which could not be visualised a few years back. Such vigour will help the state re-emerge as the premier industrial state,” he said.

“However, West Bengal has not yet adopted the discipline of fiscal responsibility. The state is yet to develop its Own Fiscal Correction Path (OFCP) and put in place the Fiscal Responsibility and Management Act, as was advised by the 12th Finance Commission,” he said.

”West Bengal is one of the most debt-stressed states. Interest payment by the state alone accounted for 48 per cent of the revenue collection last year. It has an unsustainable revenue deficit position,” Chidambaram said at the 105th annual general meeting of the Bharat Chamber of Commerce here.

The finance minister exhorted the business community of the state to impress upon chief minister Buddhadeb Bhattacharjee the necessity of fiscal discipline.

Both the revenue deficit (3.63 per cent) and fiscal deficit (5.10 per cent) as proportions of state GDP, he said, were much higher than the national average and “the state should adopt a fiscal correction path to be eligible for debt relief”.

Turning to other state governments, Chidambaram said, “The 12th Finance Commission has recommended a roadmap so that each state can achieve fiscal discipline and it also has given a liberal debt relief scheme.”

With the Centre “willingly accepting a huge burden” imposed by the commission to lessen the burden of states, the latter should utilise the opportunity “to set their fiscal houses in order”, he said.

The finance minister denied the repeated allegation by the Left Front government about the low devolvement of funds to the state by the Centre. While the 11th Finance Commission had been generous to the states, “the 12th Finance Commission has been extremely generous,” he said.

Bengal had received a total of Rs 35,652 crore from the Centre under all heads during the 11th Finance Commission (2000-05), while under the 12th Finance Commission (2005-10), the state is projected to receive 30 per cent more funds at Rs 50,877 crore.