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How West Bengal put brakes on growing fiscal deficit

Published

3 years ago

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With only a few days to go before the state budget, it would be interesting to watch how state financial advisor Amit Mitra put brakes on the growing fiscal deficit in the state.

Experts are of the opinion that the state financial condition was showing signs of recovery despite the outstanding liabilities but the financial burden caused by the social schemes announced by the state is having a negative impact on the financial health of the state.

The revenue deficit has been pegged at Rs 26,755.25 crore which is more than three per cent of the Gross State Domestic Product (GSDP) limit. Going by the past trend, the figure is likely to increase further. The fiscal deficit shot up from Rs 52,350.01 crore in 2020-21 to Rs 60,863.96 crore in 2021-22. The upswing in deficit is expected, considering that both the state’s tax and non-tax revenues have plummeted during the pandemic.

The state’s own tax revenue dropped from Rs 60,669.37 crore in 2019-20 to Rs 59,886.59 crore in 2020-21 and its share in central taxes plunged from Rs 48,048.40 crore to Rs 44,737.01 crore during the same period. The period also witnessed a fall in non-tax revenue from Rs 3,212.90 crore to Rs 2,466.31 crore.

Given the pandemic-induced fall, the budget estimate of Rs 50,070.29 crore as state’s share in central taxes, Rs 75,415.74 crore as its own tax revenue and Rs 4,611.72 as its non-tax revenue, appear unrealistic, which means the current fiscal may end with a higher revenue deficit as well as an increased fiscal deficit.

With an estimated fiscal deficit of 4.03 per cent of its GSDP, West Bengal is among those few states that have crossed the three per cent threshold limit. In 2020-21, the percentage was 3.86 as against 2.94 per cent in 2019-20. Not only that, the GSDP growth rate at 2011-12 constant prices went up from 4.17 per cent in 2012-13 to 6.13 per cent in 2015-16, 7.2 per cent in 2016-17, and 6.41 per cent in 2018-19 but again plunged to 5.6 per cent in 20-21. However, it still consistently remained below the national average.

Interestingly enough, Bengal’s debt-GSDP ratio stood at its peak in 2010-11 at 41.9 per cent, according to a NITI Aayog-sponsored survey conducted by IIM Calcutta. This was the highest in the country. Since then, the ratio has gradually come down and stood at 34.75 per cent in 2018-19 but in the 2020-21 financial year it again shot upto 38.8 per cent indicating the pressure on the economy of the state.

A comparative study shows that the states with the highest debt-GSDP ratio in FY22 are Punjab (53.3 per cent), Rajasthan (39.8 per cent), West Bengal (38.8 per cent), Kerala (38.3 per cent) and Andhra Pradesh (37.6 per cent). All these states receive revenue deficit grants from the Centre.

Former chief economic advisor to the central government and BJP MLA Ashoke Lahiri said: “What is worrying us more is a constant increase in the primary deficit (fiscal deficit minus interest payment). Figures from RBI show that GSDP to primary deficit was 0.4 per cent in 2019-20. In a year that shot up to 1.4 per cent and in 2021-22 that is 1.9 per cent. This points to the fact that even if the interest burden is removed, the state continues to borrow more”.

The precarious financial condition of the state was evident from the sudden increase in market borrowing. The market borrowing of West Bengal so far in the fiscal year 2022 is 20 per cent higher on a year-on-year basis, according to a report by the CARE Ratings. Only Nagaland, up by 71 per cent, had a higher borrowing during the period than West Bengal.

Haryana (by 11 per cent), Sikkim (by 7 per cent), Jammu and Kashmir and Maharashtra (by 4 per cent each) and Rajasthan (by 3 per cent) are the few other states that have higher borrowings so far in the current fiscal than the comparable period of a year ago. In the case of other remaining states, it is lower than last year.

According to the statement issued by the Reserve Bank of India, the state is likely to borrow 12 times raising around Rs 20,000 crore from the market between the period of January 1 and March 31 making it obvious that the state government is struggling hard to negotiate the expenses caused by the social schemes launched by Chief Minister Mamata Banerjee.

Interestingly enough, in the period between April 2020 and December 2020 when the state revenue plummeted to all time low because of the pandemic situation and the consequent lockdown, the state raised around Rs 35,000 crore from the market but during the current financial year between April 2021 to December 2021, it went for a market borrowing of Rs 52,500 crore. During the same period in 2019, the state borrowed Rs 28,000 crore via State Development Loan.

Incidentally, when the 34-year rule of the Left Front came to an end in 2011 and Mamata Banerjee became the chief minister, the accumulated debt of the state was Rs 1.93 lakh crore. But, according to the state government’s budget figures, the accumulated debt is likely to go upto Rs 5.5 lakh crore by the end of the 2020-21 financial year.

The state government’s dying effort to negotiate the huge cost of non-planned expenditure came to the fore when recently chief minister Mamata Banerjee directed all the departments to cut down on unnecessary expenditure beyond the approved budget and not to take any new project without the approval of the state Chief Secretary or the finance department. The announcement was an obvious indication that the government is trying to negotiate the financial burden caused by the non-planned expenditure of the dole politics announced by the chief minister Mamata Banerjee before the election.

After coming to power for the third time- Chief Minister Mamata Banerjee announced two major schemes – ‘Lakshmir Bhandar’ and ‘Swastha Sathi’ for all – the schemes that demand a huge financial involvement. ‘Lakhmir Bhandar’ is a project where the state is supposed to give Rs 1,000 to the women belonging to SC/ST/OBC and Rs 500 to the women belonging to General caste. The government has allocated a budget of approximately budget of Rs 12,900 crore for around 1.8 crore women who have so far registered themselves for the scheme.

Initially the government had an estimate that nearly 2 crore beneficiaries will register for ‘Lakshmir Bhandar’ project but so far, the government has received an application of 1.63 crore of which 1.52 crore has been approved. Nearly 7 lakh applications have been cancelled. The government has spent more than Rs 800 crore for the project and going by the figure the finance department estimates that the state government will have to cough up another Rs 5,600 crore which might in turn lead to a staggering figure in a full financial year.

Countering the Centre’s Ayushman Bharat, the state launched its own scheme – ‘Sasthya Sathi Prokolpo’ where some citizens of the state were given an annual health coverage of five lakh rupees. After coming to power in 2021, the chief minister opened ‘Swastha Sathi’ for all the citizens of the state leading to a quantum leap in the expenditure. Even a year back when the estimated budget for this project was around Rs 925 crore, this year the allocation touched an astronomical figure of Rs 2,000 crore annually.

According to experts, with the decline of the revenue generation, multiple market borrowings have now become the essential compulsion of the West Bengal government now to meet its recurring expenses.

They are of the opinion that the state is struggling with the non-plan expenditure mostly to meet the promises made by Chief Minister Mamata Banerjee during her election campaign.

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National News

India is eternally grateful to armed forces: PM Modi visits Adampur Airbase after ‘Operation Sindoor’

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19 hours ago

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May 13, 2025

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New Delhi, May 13: Prime Minister Narendra Modi on Tuesday morning visited the Adampur Airbase in Punjab to meet Indian Air Force personnel and express the nation’s gratitude for their courage and fearlessness in defending the country.

His visit comes just days after India and Pakistan agreed to a ceasefire following the successful execution of ‘Operation Sindoor’, a major anti-terror operation conducted by Indian forces targeting high-value terror hubs in Pakistan and Pakistan-occupied-Kashmir (PoK).

At the base, the Prime Minister interacted with the soldiers, praising their bravery and valour.

Soldiers present at the interaction described the visit as a morale booster, noting how the Prime Minister’s presence uplifted the spirit of the troops, according to sources.

The soldiers were seen smiling in their combat uniforms, a symbol of their constant readiness.

Sharing his experience on X, PM Modi wrote, “Earlier this morning, I went to AFS Adampur and met our brave air warriors and soldiers. It was a very special experience to be with those who epitomise courage, determination and fearlessness. India is eternally grateful to our armed forces for everything they do for our nation.”

Adampur Airbase was among the targets of Pakistan’s retaliatory attempt during the night of May 9 and 10, following India’s strike on terrorist infrastructure across the border.

Pakistani drones and missiles were intercepted and neutralised by India’s air defence systems, showcasing the preparedness and effectiveness of the Indian armed forces.

The visit also coincided with PM Modi’s recent address to the nation where he commended the armed forces for the execution of ‘Operation Sindoor’, stating that it had achieved its objectives with precision and resolve.

“I salute the armed forces, Intelligence agencies and scientists for their grit that helped ‘Operation Sindoor’ achieve its objective,” the Prime Minister said.

Reaffirming India’s new doctrine in its fight against terrorism, PM Modi had said that ‘Operation Sindoor’ was dedicated to the nation’s collective spirit, particularly to the women of India, whose safety and honour were at the heart of the mission.

He underlined that the operation had sent a clear message to terrorist organisations and their backers — that any attack on India or its citizens would be met with decisive and powerful retribution.

“The world has seen India’s capability and it is clear terrorists will no longer be spared,” he asserted.

The Prime Minister stressed that ‘Operation Sindoor’ marked a new and unwavering chapter in India’s counter-terrorism strategy — one that is relentless, precise, and uncompromising.

He emphasised that India’s military carried out highly targeted strikes on terrorist hideouts in Pakistan, reinforcing the country’s resolve to safeguard its citizens and national values.

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Crime

15 labourers die after consuming spurious liquor in Amritsar

Published

20 hours ago

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May 13, 2025

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Chandigarh, May 13: At least 15 men have died after allegedly consuming spurious liquor in four villages of the Majitha area in Amritsar district, officials said on Tuesday.

The deceased, mostly labourers working in brick kilns, include residents of Bhangali, Marari Kalan Therwal and Patalpuri villages.

Superintendent of Police (Amritsar Rural), Maninder Singh said the main accused Prabhjit Singh has been arrested and he turned out to be the mastermind behind supplying the spurious liquor.

A First Information Report (FIR) was on Tuesday registered under Section 105 of the BNS and 61-A of the Excise Act.

The others arrested were Kulbir Singh, alias Jaggu, a brother of the main accused Prabhjit Singh, Sahib Singh, alias Sarai, Gurjant Singh and Ninder Kaur, wife of Jeeta.

The Investigation Police Officer told the media that preliminary investigation indicated that “all took liquor from a single source on Sunday evening. Some of them died on Monday and locals cremated them without informing the police. We received information about the deaths due to liquor late in the evening (Monday) and initiated an investigation.”

A spokesperson for the government said an investigation of the entire spurious liquor network is on.

In March 2024, as many as 24 people had died in Sangrur due to spurious liquor. Earlier in 2020, more than 100 people died across Punjab in one of the deadliest illicit liquor tragedies.

As the war against drugs ‘Yudh Nashian Virudh’ to eradicate the drug menace from the state completed 72 days on Monday, Punjab Police registered 6,280 FIRs and arrested 10,444 drug smugglers.

Notably, Chief Minister Bhagwant Singh Mann had asked the Commissioners of Police, Deputy Commissioners and Senior Superintendent of Police to make Punjab a drug free state.

Since the launch of the ‘Yudh Nashian Virudh’ campaign, Punjab Police under the directions of Director General of Police (DGP) Gaurav Yadav has been conducting different operations including cordon and search operations, night domination and raids at drug hotspots across the state.

Special Director General of Police (Special DGP) Law and Order, Arpit Shukla, who has been monitoring these operations, on Monday said that police teams have recovered 398 kg heroin, 186 kg opium, 117 quintals poppy husk, 8 kg charas, 135 kg ganja, 2.5 kg ICE, 1.2 kg cocaine, 23.57 lakh intoxicant pills/tablets and Rs 8.58 crore drug money from their possession.

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National News

India to brief foreign Defence Attaches on ‘Operation Sindoor’ today

Published

21 hours ago

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May 13, 2025

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New Delhi, May 13: India will brief Defence Attaches (DAs) from various countries based in New Delhi on Tuesday at 3:30 p.m., providing them with technical details of ‘Operation Sindoor’, the country’s recent anti-terror military offensive.

The Indian armed forces are set to share critical insights and operational data, including the performance of the indigenous air defence systems and outcomes of the strike missions carried out between May 7 and May 10.

Sources confirmed that the session will cover a wide array of developments, including the destruction of Chinese and Turkish-made drones and PL-15 missiles by India’s air defence forces, preventing any breach into Indian airspace.

The move comes a day after Director General of Military Operations (DGMO) Lt Gen Rajiv Ghai addressed the media, stating that the budgetary and policy support received by the armed forces over the past decade enabled the creation of a robust multi-layered air defence grid.

He said the system proved to be a decisive shield during Pakistan’s retaliatory aerial attacks on May 9 and 10. “Our battle-proven systems performed exceptionally, and the indigenous Akash missile system played a critical role,” Lt Gen Ghai noted.

The briefing to the Defence Attaches will also include details of a hotline conversation that took place on Monday evening around 5 p.m. between the Indian and Pakistani DGMOs.

Lt Gen Ghai and his Pakistani counterpart, Maj Gen Kashif Abdullah, reportedly discussed methods to restore calm along the Line of Control and reiterated commitments to the ceasefire understanding reached after the Indian operation halted at Pakistan’s request on May 10.

Official sources said that Pakistan conveyed it would not escalate the conflict and expressed willingness to adhere to the ceasefire agreement. The hotline exchange between the two military leaders also included discussions on maintaining restraint and monitoring the situation moving forward.

Meanwhile, Prime Minister Narendra Modi on Monday addressed the nation for the first time following the understanding that ended the intense military exchanges.

He reiterated India’s hardline stance against Pakistan, stating unequivocally that New Delhi will not hold any dialogue with Islamabad except on issues related to terrorism and Pakistan-occupied-Kashmir (PoK).

“The Kashmir issue cannot be viewed in isolation from Pakistan’s continuous export of terrorism,” the Prime Minister said.

He strongly criticised Pakistan’s military and government for protecting and promoting terror outfits, warning that such support could bring about their eventual downfall.

PM Modi’s remarks also come amid reports that Pakistan attached certain conditions to the ceasefire, including a proposal to revive the Indus Waters Treaty, which India had suspended as a non-military strategic pressure tactic.

However, India has maintained that talks, if any, will remain confined strictly to terrorism and PoK.

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