Calcutta, July 17: Finance minister Asim Dasgupta may go on presenting zero or close-to-zero deficit budgets, but Bengal’s balance sheet is punched with large holes.
The report of the Comptroller and Auditor General of India for the year ended March 2002, tabled in the Assembly on Wednesday, shows alarming deficits, mounting liabilities and an ever-increasing interest burden.
Financial imbalance, represented by deficits, has shown a steady rise over 1997-2002. The share of state’s own taxes in total revenue has dropped from over 50 per cent to 44.95 per cent.
“It’s very difficult to find ways for increasing the tax mop-up as there are hardly any signs of improvement in the investment climate. Introduction of value-added tax, and the Centre’s commitment to compensate the states for any revenue loss, could have altered the situation. But with general elections scheduled next year, we can’t expect that to happen either,” said an economist.
On the expenditure side, interest payment has grown the fastest (annual growth of 28.49 per cent), which indicates that the state is plunging deeper and deeper into debt. For a government that tirelessly repeats its commitment to welfare dropping expenditure on social and economic services through the five years presents a contradiction: its money is not where its mouth is.
The same distance between mouth and money is evident in the expenditure pattern. As percentage to revenue, revenue expenditure rose to 160.92 per cent in 2001-2002, but the share of capital expenditure in total spendings was a meagre 5.13 per cent in that year.
With capital expenditure so low, where is the money for infrastructure going to come from' Infrastructure development is the mantra chief minister Buddhadeb Bhattacharjee is chanting. Prime Minister Atal Bihari Vajpayee spoke of the need, too, at the Bengal Chamber of Commerce 150th anniversary yesterday.
Along with the widening gap between revenue and expenditure, the fiscal liabilities or, loosely put, debt of the state has swelled more than two and a half times from Rs 25,026 crore in 1997-98 to Rs 65,583 crore in 2001-2002. It goes up by another Rs 7,643 crore, if contingent liabilities — guarantees to loans, interest payment and other investments — are counted.
With no assets to support this huge liability, the CAG expresses concern. “More than half of the state’s fiscal liabilities had ceased to have an asset back-up..., these indicate a continuing deterioration of the state’s fiscal situation”.
At 3.35 per cent in 2001-02, the gross state domestic product is growing at a lower rate than the sharp acceleration in interest payments. “Persistence of this phenomenon may endanger debt sustainability,” the report says.
It also shows how managing of resources is devoid of economic logic. The government went on pumping borrowed funds in various statutory corporations — rural banks, joint stock companies and co-operative societies — without caring for returns. “Return on investment was one-tenth of one per cent in the last five years,” the report adds.
In this period, the government spent over Rs 1,900 crore by giving implicit subsidy to various agencies, handing them funds at interest rates lower than at what it itself borrowed the money.
Despite the scarcity of resources, government departments — with the notable inclusion of finance itself — did not “maintain any systematic records of loan, repayment schedule, actual repayment made and amounts overdue for repayment”, the report has found.