Hyderabad: Appreciating the overall progress achieved by Telangana, the 15th Finance Commission on Tuesday cautioned the government about not complying with FRMB norms on fiscal deficit and debt levels.
Speaking to media persons at Jubilee Hall after meeting Chief Minister K. Chandra-sekhar Rao, commission chairman N.K. Singh and its members said they have asked the state government to submit a mid-term roadmap explaining the steps being taken to maintain the ratio of fiscal deficit and debt in the coming years.
A failure to maintain the ratio in accordance with FRMB norms, they said, would derail the state’s overall progress.
The fiscal deficit means the state is spening over and above its income by raising loans. The Fiscal Responsi-bility and Budget Manage-ment Act, 2003, aims at bringing fiscal deficit to 3 per cent of GDP (for Union Budget) or GSDP (Gross State Domestic Product).
The commission pointed out that the fiscal deficit of the state rose sharply from 3.26 per cent of GSDP in 2015-16 to 5.35 per cent in 2016-17. The fiscal deficit excluding amount transferred under UDAY scheme (`7,500 crore) was 4.22 per cent in 2016-17 and the fiscal deficit has, however, come down to 3.12 per cent in 2017-18.
Debt to GSDP ratio of Telangana jumped by 3.5 percentage points from 16.96 per cent in 2015-16 to 20.44 per cent in 2016-17.
The state’s fiscal deficit has increased despite having highest own tax revenue to GSDP of 7.34 per cent because of the higher welfare spending undertaken by the KCR government.
The CAG Report, however, has questioned the revenue surplus of the state.
The state government, however, has urged the Commission to continue the facility of additional borrowings over and above the three per cent of GSDP limit and allow raising additional borrowing facility up to one per cent of GSDP.
Highlighting the Centre’s intrusion into state subjects, the Chief Minister has pitched for a reset of the Centre-State relations.
“As per the assessment made by the 14th Finance Commission, the Centre’s expenditure on State subjects increased from an average of 14 per cent of its total expenditure to 20 per cent and on subjects in the Concurrent List from an average of 13 per cent to 17 per cent between 2002-05 and 2005-11. This is indicative of the excess fiscal space available with the Centre, which can be shared with states,” he claimed.