Santosh Kumar Mohapatra
t is alleged that the total debt of Odisha government has risen from Rs 18,100 crore in 1999-2000 (Biju Janata Dal came to power in March 2000) to Rs 91,943.68 crore in 2018-19 — an increase by Rs 73,843.68 crore over 19 years. Critics say the state is in a debt trap.
But, they base their arguments on the nominal value and ignore the intricacies of economics. As in the case of individuals, whose income and expenditure keeps varying, a state or a country too sees an increase in absolute value of GSDP or GDP, per capita income, size of budget, or debt.
For instance, GSDP of Odisha was Rs 46,756 crore in 2001-2002. It rose to Rs 4,43,479 crore in 2018-19. Odisha’s annual budget was only Rs 1.77 crore in 1936-37. It increased to Rs 14,043.3 crore in 2000-01 and is estimated to be Rs 1,20,028 crore in 2018-19.
Debt is also likely to increase each year. Hence, debt burden, including other fiscal indicators, should be measured as proportion of GDP or GSDP or as percentage of budgetary outlay and it should be analysed how much it is congruent to the terms of the Finance Commission or Fiscal Responsibility Budget Management (FRBM) Act.
By contrast, the country is inching towards fiscal profligacy. The fiscal deficit of Central government in the first eight months till November 2018 stands at Rs 7.17 lakh crore, or 114.8 per cent of the Rs 6.24 lakh crore full year’s target
Odisha had one of the highest Debt-GSDP ratios among Indian states at 50.73 per cent in 2002-03 compared with national average of 34.21 per cent worked out by the 12th Finance Commission. But it has declined and is now less than those of many states. Outstanding liabilities that refer to debt accumulated from financing the fiscal deficit in the past are 23 per cent of GSDP in case Odisha, which is less than the national average of 24.4 per cent.
Many other states such as Andhra Pradesh (29 per cent), Bihar (31 per cent),Goa( 25 per cent), Haryana (27 per cent), Himachal Pradesh (36 per cent), Jammu and Kashmir (50 per cent), Jharkhand (27 per cent), Kerala, (31 per cent), Madhya Pradesh (25 per cent), Mizoram (34 per cent), Nagaland (39 per cent), Punjab (41 per cent), Rajasthan (33 per cent), Sikkim (26 per cent), Tripura (30 per cent), UP (26 per cent), WB (38 per cent) have much higher outstanding liabilities-GSDP ratio than Odisha.
By contrast, the country is inching towards fiscal profligacy. The fiscal deficit of Central government in the first eight months till November 2018 stands at Rs 7.17 lakh crore, or 114.8 per cent of the Rs 6.24 lakh crore full year’s target. Total debt of the central government has increased 49 per cent to Rs 82 lakh crore in the last four-and-half years.
The corresponding amount till June 2014 was Rs 54,90,763 crore. The government is widely expected to miss its fiscal deficit target of 3.3 per cent of GDP in the current fiscal year due to decline in revenue, and may resort to spending cuts in the last quarter.
It is not just the Odisha government, but almost all states and the Centre that are announcing freebies and various schemes for electoral benefits without budgetary allocation; these will derail their fiscal road map. The Yogi Adityanath government in Uttar Pradesh has announced pension for sadhus. Fiscal deficit of some states has risen as a result of loan waivers. Prime Minister Narendra Modi’s pre-election handouts are expected to cost more than Rs 1 lakh crore and his government wants to illegally present a full budget instead of an interim budget.
The central government is illegally mounting pressure on the RBI to share portions of its surplus or contingency fund to finance such expenditures. Hence the Centre should first adhere to fiscal rectitude and then advise states to emulate it. However, debt is not bad if it is spent on creating assets and is within repayment capacity.
The writer is an Odisha-based economist. e-Mail: email@example.com.