When the State is insistent on more development-led growth, Finance Minister Pradip Amat has surprisingly affected a cut in capital expenditure (capex) for the year 2016-17. Since State’s GSDP in 2015-16 has apparently contracted to 6.16 per cent and slowdown in economy is persistent, the expectation for higher capex was belied.
Though total development expenditure in 2016-17 Budget Estimates (BE) has been maintained at 51 per cent of the total expenditure as was in 2015-16 Revised Estimates (RE), capital expenditure, chip for long-term growth, was sliced by as much as Rs 345 crore in 2016-17 BE over 2015-16 RE. The result: Capital outlay as a proportion to GSDP shrunk to mere 5.11 per cent from 6 per cent in 2015-16 RE.
Another blip in development expenditure is the Government had trimmed plan expenditure on revenue account in 2015-16 RE, but the non-plan revenue expenditure got a spike. Similarly, in the 2016-17 BE the gap between expenditure on revenue account under
Plan and Non-Plan widened to around Rs 17,000 crore from around Rs 15,000 crore in 2012-13.
This reflects the fact that expenditure by Government is not utilised more to boost productivity in the economy, which in turn could have created more jobs for job-seekers and had given a fillip to per capita income.
Why this trend looks worrisome is as the Government is borrowing more to finance its expenditure plan, unless the productivity in economy gets a boost, this strategy could well turn a liability for the State.
Consider this. The net debt of the State Government is to touch an all time high of Rs 12, 660 crore in 2016-17. The result: Total debt stock of State to again reach an all-time high of Rs 64, 991.83 crore – which is a whopping 83 per cent of the total revenue receipts of State from 73 per cent in 2015-16 RE. Odisha’s debt-stock as a percentage of GSDP in 2016-17BE is to touch 16.96 per cent against 13.98 per cent in Chhattisgarh. However, the proportion now is within sustainable limits but the rise-in trend signals the red herring.
The reason: Odisha could fund a mere 44 per cent of its total revenue expenditure in 2016 – 17 from its own revenue against 52 per cent by Chhattisgarh. Odisha also has to spend 5.95 per cent of its revenue receipts towards interest payment against 4.39 per cent by Chhattisgarh. Moreover, State’s own tax revenue could provide only around 25 per cent of its total revenue earnings in 2016-17BE against around 37 per cent in Madhya Pradesh. This reveals comparatively how little contribution the State’s own tax revenue has to the earning kitty of the State.
The fallout: Government has to depend more on Central transfers and borrowings to finance its development plan in future. Unless the borrowings were utilised to boost economy’s productivity, the expenditure strategy would only then add to the debt burden of the State.