Maiden Budget challenge for AAP govt in Punjab amid mounting debt
The AAP government, which is ready to present its maiden Budget in the Vidhan Sabha on Monday, faces a big challenge of getting the state back on the fiscal consolidation roadmap as specified under the Fiscal Responsibility and Budget Management Act.
Punjab has exceeded the targets of both gross fiscal deficit (4.6 per cent) and interest payment revenue receipts ratio – a measure of debt-servicing measure on state revenues — making it the highly debt-stressed state in the country. This has been indicated in a report, “State Finances: Risk Analysis,” by the apex regulatory bank, Reserve Bank of India.
Caught in loan trap
- Data available with The Tribune shows that the state raised Rs 2,500 crore from loans in April alone — Rs 1,500 crore on April 21 and Rs 1,000 crore on April 28
- Last year, 21.3 per cent of the revenue receipts were utilised only for the payment of interest on loans.
- As the total outstanding debt will increase further, so will the interest payment, pulling the state further into a debt trap
The report also points out that the own tax revenue of three states — Punjab, Madhya Pradesh and Kerala – has been declining over the years, while the non-tax revenue has remained volatile, dropping significantly since 2003-04. This has increased the state’s dependence on market borrowings and affected the expenditure planning. In 2021-22 – which was the election year – the previous government borrowed Rs 25,872 crore, while it failed to meet its revenue target of Rs 95,257 crore. The state could manage to earn just Rs 78,136 crore in the last fiscal. As a result, the revenue deficit has increased by a whopping 89 per cent over the targeted revenue deficit of Rs 8,622.30 crore.
The state’s burgeoning debt burden will only increase further during this fiscal, as the new government so far has expressed its unwillingness to impose any new taxes.
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