State Finances of Odisha: 2015-16 · Odisha Economic Survey, 2015-16 the higher grants from the...

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Odisha Economic Survey, 2015-16

State Finances of Odisha: 2015-16

Introduction

The overall fiscal scenario in Odisha continued to be broadly satisfactory from 2013-

14onwards despite a couple of aggregate indicators causing some concern. The basic

prudential policy of maintaining revenue account surpluses to finance the capital outlays in

developmental sector continued to be successfully implemented. The continuous decline in

debt stock to GSDP ratio and debt servicing ratio with higher growth in GSDP has made the

state fiscal policy sustainable and solvent. Revenue Surplus, low fiscal deficit and low debt

to GSDP ratio has created space for more borrowing. Considering, the positive impact of

debt on the potential GSDP of the state, there is a need for incurring fresh debt, to facilitate

higher allocation in developmental sector for creation of capital assets as well as

maintenance of the existing assets so as to increase the productivity of the state economy.

Guided by the rolling targets of the Medium Term Fiscal Plan, a part of the obligations under

the fiscal responsibility legislation of the State, key fiscal parameters were kept within

permissible range, meeting an important conditionality of the Thirteenth Finance

Commission of India. All these are achieved against the backdrop of the sluggish growth in

Indian Economy.

The subdued macro-economic scenario has affected the State’s finances to a limited extent.

Besides transfers from the Centre also exhibited fall; for a state like Odisha that is heavily

dependent on the central transfers, such fall can have serious consequences.

9.1.Overview The continued modest economic growth, particularly so in the mining and manufacturing

sectors has adversely affected the buoyancy in both tax and non-tax revenues of the State.

The central transfers that includes both shared taxes and grants, after dropping noticeably in

2012-13 and 2013-14 as ratios of GSDP, have increased in 2014-15and 2015-16 mainly due

to the transfer of Central Assistance for 66 restructured Centrally Sponsored Schemes

(CSS) through Consolidated Fund of the State and the discontinuance of the previous

practice of direct transfer of central assistance to various implementing agencies. Therefore,

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the higher grants from the centre are because of the change in the accounting of financial

assistance for the centrally sponsored schemes (CSS).

Total revenue receipts (as % of GSDP) have gone up from 17.65% in 2013-14 to 18.40% in

2014-15 and 21.35% in 2015-16(BE) respectively. Figure 9.1 presents the trends in broad

fiscal parameters of revenue and expenditure that sum up the fiscal position of the State.

Figure 9.1: Trends in Broad Expenditure Ratio (% GSDP)

Revenue expenditures were also higher at 16.51% of GSDP in 2014-15 as compared to

16.45% in 2013-14. However, the Total Revenue Receipt has gone from 17.65% of GSDP in

2013-14 to 18.40% of GSDP in 2014-15. The State could break the capital outlay barrier of 3

per cent of GSDP in 2014-15 by achieving Capital Outlay at 3.6% of GSDP. Besides, the

State could achieve total expenditure more than 20% of GSDP in 2014-15.

The Total Revenue Receipt and total Revenue Expenditure are budgeted at 21.35% and

19.81% of GSDP respectively in 2015-16. The Capital Outlay and Total Expenditure are

estimated at 4.56% and 25.42% of GSDP in 2015-16.

During 2012-13 to 2014-15, the annual average total revenue receipt has increased by

0.40% of GSDP as against annual average rise in revenue expenditure of 0.51% of GSDP

during the same period. As a result, the revenue surplus of 2.23% of GSDP in 2012-13 has

come down to the level of 1.89% of GSDP in 2014-15. The zero fiscal deficit position in

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2012-13 has gone up to -1.17% of GSDP in 2014-15. This implies the entire borrowing

during this time period has financed higher capital outlay and it has reached to a level of

3.57 % of GSDP. It is budgeted at 4.56% of GSDP in 2015-16. Figure 9.2 depicts the trends

the major deficit indicators.

Figure 9.2: Major Deficit Indicators (% GSDP)

*Negative (-) sign indicates deficit

During 2011-12 to 2015-16(BE), the State has been generating Revenue Surplus as against

the revenue deficit of all the states in India at the consolidated level during the same time

period. Though, the fiscal deficit which indicates the net borrowing of the states is going up

since 2011-12, because of less interest expenditure, the primary deficit ratio of the State has

remained favorable as compared to all states in India1. The fiscal deficit is required to be

kept within the prescribed 3% of GSDP in terms of FRBM Act and should be taken care of

while working out the revised estimates for 2015-16.

Fiscal consolidation in Odisha has been undertaken under a rule based framework through

the enactment of Odisha Fiscal Responsibility and Budget Management (FRBM) Act, 2005.

The management of state finance in Odisha is guided by FRBM Act, 2005 and the

recommendation from successive finance commissions. The State Government has

amended the FRBM Act, 2005 on the basis of recommendations of the 13th Finance

Commission. To examine the impact of FRBM Act on the Odisha’s fiscal space, the time

1 State Finances: A Study of Budgets 2014 -15, Reserve Bank of India

2.492.23

1.20

1.891.54

0.280.00

-1.67 -1.77

-3.13

1.421.10

-0.63 -0.86

-1.82

-4.00

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

20

11

-12

20

12

-13

20

13

-14

20

14

-15

20

15

-16

(B

E)

Revenue Deficit / . Fiscal Deficit / . Primary Deficit / .

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period for assessment of fiscal performance is undertaken by considering two time periods

around the implementation of FRBM legislation. The time periods for assessing the fiscal

performance in terms of major deficit indicators are from 1995-96 to 2004-05 (Pre FRBM

Period) and 2005-06 to 2014-15 (Post FRBM Period). Each time period is of ten year

duration and annual average of major fiscal deficit indicators are taken to assess the impact

of FRBM Act on state fiscal performance.

Figure 9.3: Major Deficit Indicators (% GSDP): Pre FRBM & Post FRBM

*Negative (-) sign indicates deficit, RDR, FDR & PDR are Revenue Deficit, Fiscal Deficit and Primary

Deficit Ratio as proportion of GSDP

Figure 9.3 presents a comparative view of State Fiscal Performance in terms of major fiscal

deficit indicators in Pre FRBM and Post FRBM Period. A significant improvement has been

registered in Post FRBM Period over Pre FRBM Period.

-3.34%

-5.58%

-1.60%

1.90%

-0.38%

1.58%

-6.00%

-5.00%

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

RD

R

FDR

PD

R

Pre FRBM / . Post FRBM / .

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9.2. Composition of Total Revenue Receipt

The contribution of State Own Revenue to total Revenue Receipt has increased to 53% and

52% respectively in 2012-13 and 2013-14 from 49% in 2011-12. During 2014-15 and 2015-

16(BE), the share of Central Transfer has been more than the share of State Own revenue.

This is mainly due to change in the accounting of financial assistance for the centrally

sponsored schemes (CSS). Figure 9.4 presents the trends in composition of Total Revenue

Receipt. The average share of State Own Revenue and Central Transfer to the Total

Revenue Receipt is calculated at 49% and 51% respectively during 2011-12 to 2015-16(BE).

Figure 9.4: The composition of Total Revenue Receipt

*SOR: State Own Revenue, CT: Central Transfer

The State Own Revenue andCentral Transfer are reported at 9.02% and 9.47% of GSDP

during 2011-12 to 2015-16(BE).

9.3. Trends in State Own Revenue The State Own Revenue (SOR)as proportion of GSDP has improved from 8.83% to 9.11%

in 2013-14. The rising trend is mainly driven by State Own Tax Revenue(SOTR).Because of

deterioration in collection of State Own Non Tax Revenue(SONTR) in 2014-15, the SOTR as

a proportion of GSDP has declined to 9.01%.An important reason for the lowSONTR of the

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

20

11

-12

20

12

-13

20

13

-14

20

14

-15

20

15

-16

(BE)

Ave

rage

49%53% 52%

49%

43%

49%51%47% 48%

51%

57%

51%

SOR / CT /

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State is sluggish tax collection on account of subdued mining activities. The budget estimate

of SOR is pegged at 9.12% of GSDP. Figure 9.5 presents the trends in SOR.

.

Figure 9.5: Trends in State Own Revenue Receipt (% of GSDP)

*SOR: State Own Revenue, SOTR: State Own Tax Revenue. SONTR: State OwnNon Tax Revenue

The Tax to GSDP ratio represents the tax efficiency of the state. The consolidated SOTR to

GSDP ratio for all the states in India is reported at 7.8% and 7.7% respectively in 2013-14

and 2014-15 which higher than Odisha.

The consolidated State Own Non Tax Revenue to GSDP ratio for all the states in India is

reported at 1.3% and 1.4% respectively in 2013-14 and 2014-15 which lower than Odisha.

Hence, there is a need to raise the efficiency in Tax Revenue for the state as efficiency is

below the national average.

5.97 5.89 6.09 6.40 6.40

2.86 3.16 3.02 2.61 2.71

8.83 9.05 9.11 9.01 9.12

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.008.00

9.00

10.00

20

11

-12

20

12

-13

20

13

-14

20

14

-15

20

15

-16

(BE)

SOTR / . SONTR / . SOR / .

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Figure 9.6 presents the composition of SOTR and SONTR in State Own Revenue.

Figure 9.6: Composition of SOTR and SONTR

The share of SOTR and SONTR in State Own Revenue is 68% and 32% respectively during

2011-12 to2014-15. In order raise the SOTR to GSDP ratio and buoyancy in SOTR, the

share of SOTR has been targeted at 70% in 2015-16(BE).

9.4. Tax Buoyancy

Tax buoyancy is defined as the ratio of growth in tax revenue to the growth in the

corresponding nominal GSDP. Figure 9.7 presents the trends in buoyancy in both SOTR and

SONTR. The buoyancy in SOTR has been inelastic in 2012-13 and average buoyancy

during the period 2011-12 to 2015-16(BE) is calculated at 1.31. The buoyancy in SNOTR

has been inelastic in 2013-14 and negative in 2014-15. The average buoyancy during the

period 2011-12 to 2015-16(BE) is estimated at 1.32. Figure 9.7 presents the trends in tax

buoyancy.

70%

30%

Composition in 2015-16(BE)

SOTR SONTR

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Figure 9.7: Trends in Tax Buoyancy

*SOTRB: State Own Tax Revenue Buoyancy, SONTRB: State Own Non Tax Revenue Buoyancy

9.4. Trends in State Own Tax Revenue

The tax structure of the State has been subtly changing over the years, and particularly in

the recent period. The composition of taxes reflects the structure of the state economy. The

trends in collection of taxes as percentage of GSDP are presented in the table 9.1.

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

20

11

-12

20

12

-13

20

13

-14

20

14

-15

20

15

-16

(BE)

Ave

rage

1.72

0.89

1.43 1.48

1.01

1.31

2.98

1.91

0.43

-0.31

1.61

1.32

SOTRB SONTRB

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Table 9.1: Trends in Collection of Taxes (% of GSDP)

The collection of sales tax (VAT), being the consumption based tax, is growing since 2011-

12 and the average collection on account of VAT as proportion of GSDP is reported at

3.78%. It is targeted at 3.85% of GSDP in 2015-16(BE). Followed by VAT, the collection of

State Excise and Entry Tax are calculated at 0.62% and 0.56% of GSDP during 2011-12 to

2014-15. In this period, the entry tax has exhibited a declining trend. State Excise and Entry

tax are budgeted at 0.69% and 0.58% respectively in 2015-16. A declining trend is observed

in case of Motor Vehicle Tax and Stamp & Registration fee. Professional tax has been

stagnating during this period.

The descriptive statistics of the tax components of SOTR is presented in table 9.2.

Table 9.2: Descriptive Statistics Collection of Taxes (% of GSDP)

Sales Tax (VAT) State Excise

Stamp Duty &Regn Fees Entry Tax

Mean 3.79% 0.64% 0.27% 0.56%

Std. Dev. 0.08% 0.04% 0.11% 0.02%

Skewness -153.56% 35.17% 234.45% -106.34%

Median 3.79% 0.62% 0.22% 0.56%

Minimum 3.64% 0.59% 0.21% 0.53%

Maximum 3.87% 0.69% 0.50% 0.58%

Motor Vehicle Tax

Electricity Duty Land Revenue Profession Tax

Mean 0.31% 0.31% 0.18% 0.05%

Std. Dev. 0.02% 0.13% 0.03% 0.00%

Skewness 105.24% 214.85% 34.69% 30.63%

Median 0.31% 0.24% 0.16% 0.05%

Minimum 0.29% 0.23% 0.14% 0.05%

Maximum 0.35% 0.56% 0.23% 0.06%

Item 2011-12 2012-13 2013-14 2014-15

Average

2011-12 to

2014-15

2015-16

(BE)

Sales Tax (VAT) 3.64% 3.79% 3.87% 3.81% 3.78% 3.85%

State Excise 0.61% 0.59% 0.64% 0.66% 0.62% 0.69%

Stamp Duty & Regn Fees 0.22% 0.21% 0.22% 0.26% 0.23% 0.50%

Entry Tax 0.58% 0.53% 0.58% 0.55% 0.56% 0.58%

Motor Vehicle Tax 0.35% 0.29% 0.31% 0.29% 0.31% 0.32%

Electricity Duty 0.24% 0.23% 0.24% 0.56% 0.32% 0.25%

Land Revenue 0.23% 0.16% 0.16% 0.21% 0.19% 0.14%

Profession Tax 0.06% 0.05% 0.05% 0.05% 0.05% 0.06%

Other Taxes 0.03% 0.03% 0.02% 0.01% 0.02% 0.01%

Total : 5.97% 5.89% 6.09% 6.40% 6.09% 6.40%

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The fluctuation in the collection of Stamp Duty and fees is relatively high as compared other

taxes. The fluctuation in professional tax is zero as the collection has stagnated over the

years. The skewness is highest for Motor Vehicle Tax as after achieving 0.35% of GSDP in

2011-12, the collection is showing a declining trend. Because of mixed trends in the tax

components, the SOTR to GSDP ratio in the state is not high.

Clearly, taxes with a broad consumption-type base are more buoyant than the others,

possibly reflecting the pattern of sectoral growth in GSDP during the last five years. The

uncertainties regarding the countrywide introduction of a goods and services tax (GST)

continue to plague comprehensive reform of the tax system and the services sector (i.e., the

largest part of GSDP) is largely out of the tax net at the State level, except the State share

in service tax levied by the Centre. The prolonged sub judicestatus of entry tax has added to

the uncertainties in the tax system of the State.

9.5. Composition of State Own Tax Revenue

Figure 9.8 and 9.9 presents the share of tax components in SOTR for the period from 2011-

12 to 2014-15 and for 2015-16(BE).

Figure 9.8: Composition of Tax Components from 2011-12 to 2014-15

62%

10% 4% 9%

5%

6%3%

1%

0%

4%

Sales Tax (VAT) State Excise

Stamp Duty & Regn Fees Entry Tax

Motor Vehicle Tax Electricity Duty

Land Revenue Profession Tax

Other Taxes

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Figure 9.9: Composition of Tax Components for 2015-16(BE)

During 2011-12 to 2014-15, the share of VAT in SOTR is highest at 62% followed by State

Excise (10%), and Entry Tax(9%). These three tax components contribute almost 80% of the

SOTR.

In 2015-16(BE), these components are expected to contribute 80% of the SOTR. However,

considering the declining trend in Stamp Duty & Registration fee, the budget 2015-16 has

estimated 100% growth over 2014-15, expecting the rise of share from 4% in 2014-15 to 8%

share in 2015-16. The tax gap in Stamp Duty & Registration fee is acknowledged and there

is a felt need to bridge this gap.

9.6. Buoyancy of Major items of State Own Tax Revenue As discussed earlier, buoyancy is a performance measure of the revenue collection with

respect tothe growth in state economy. Table 9.3 presents trends in tax buoyancy of

major tax items of State Own Tax Revenue. Steady buoyancy is not observed from the

trend. During the period from 2011-12 to 2014-15, though the annual average buoyancy

is highest for Stamp Duty & Registration Fees at 4.25, it has exhibited very high

60%

11%8%

9%

5%

4% 2%

1%

0%

3%

Sales Tax (VAT) State ExciseStamp Duty & Regn Fees Entry TaxMotor Vehicle Tax Electricity DutyLand Revenue Profession Tax

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variation2. Electricity Duty has the second highest buoyancy at 2.04 coupled with highest

variation. Land Revenue has recorded lowest buoyancy with a very high variation. VAT

and Excise Duty have shown elastic buoyancy with moderate variation.

Table 9.3: Trends in Buoyancy of Major Tax Components

Item 2011-12 2012-13 2013-14 2014-15 Average Variation

Sales Tax (VAT) 1.75 1.36 1.25 0.86 1.31 0.32

State Excise 2.23 0.65 2.18 1.22 1.61 0.67

Stamp Duty &Regn Fees 1.70 0.70 1.29 2.74 4.25 5.96

Entry Tax 1.55 0.17 2.34 0.51 1.24 0.88

Motor Vehicle Tax 0.71 -0.40 1.76 0.50 1.00 1.10

Electricity Duty 1.75 0.53 1.56 13.38 2.04 7.30

Land Revenue 2.87 -1.46 0.31 4.24 0.42 3.25

Profession Tax -0.41 0.54 1.18 1.09 0.76 0.72

Total : 1.72 0.89 1.43 1.48 1.31 0.35

It is observed that the correlation between average tax buoyancy and variation in tax buoyancy is very high at 62%.3

9.7. Composition of State Own NonTax Revenue

Mobilization of resources through non-tax sources serves the twin purpose of having a

rational non-tax structure and generating resources to finance more expenditure. The

importance of non-tax revenue is now being realized by the states in India in the context

huge financialrequirements for upgrading and modernizing basic infrastructure. Therefore,

non-tax revenue is essential to finance the operation & maintenance (O&M) of existing

capital assets that creates positive externalities.Mobilizing resources through a rational non

tax structure induces equity, efficiency and neutrality on the growth pattern of the state.

During 2011-12 to 2015-16(BE), the compound average growth rate of SONTR has been

8.76% only. The growth in collection of non-tax revenue has witnessed a huge variation of

17% during this time period.This indicates that the growth rate of collection of State‘s Own

Non Tax Revenue has been uneven. This high variation is mainly attributed to receipts

from sources like Mining Royalty, Interest, Dividend, and receipts from Forest and

Irrigation sectors. During the same period, the SONTR as proportion of GSDP is estimated

2 Variation is measured by Standard Deviation

3 Correlation Coefficient

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at 2.87%. The SONTR constitutes only 31% of the State Own Revenue. Table 9.4 presents

the trends in collection of non-tax components as proportion of GSDP.

Table 9.4: Trends in Major Non Tax Components (% GSDP)

Non Tax Components 2011-12 2012-13 2013-14 2014-15

2015-16 (BE) Average Variation

Interest 0.26% 0.23% 0.45% 0.11% 0.06% 0.21% 0.17%

Dividend 0.13% 0.22% 0.16% 0.35% 0.33% 0.27% 0.09%

Education 0.01% 0.03% 0.03% 0.01% 0.01% 0.02% 0.01%

Medical 0.02% 0.00% 0.01% 0.01% 0.01% 0.01% 0.00%

Water Supply & Sanitation

0.03% 0.02% 0.02% 0.02% 0.02% 0.02% 0.00%

Housing 0.01% 0.01% 0.01% 0.00% 0.00% 0.00% 0.00%

Forest & Wildlife 0.09% 0.07% 0.03% 0.02% 0.01% 0.03% 0.03%

Irrigation 0.15% 0.16% 0.16% 0.20% 0.15% 0.17% 0.02%

Non-Ferrous Mining &

Metallurgical Industries

2.03% 2.23% 1.99% 1.71% 1.99% 1.98% 0.21%

Others 0.16% 0.19% 0.16% 0.17% 0.12% 0.16% 0.03%

During 2011-12 to 2014-15(BE), revenue collection from Mining activity has been highest at

1.98% of GSDP followed by Dividend Receipt, Interest Receipt and user fee from Irrigation.

Revenue Collection from Mining and Interest Receiptshas huge variation followed by

Dividend. The correlation between the tax collection as proportion of GSDP and the variation

in tax collection is very high at 79%. This further validates the acute unevenness in collection

of non-tax revenue.

Equity (Share) Capital is the paid up capital infused by the State Government in Statutory

Corporations (3 nos.), Govt. Companies (84 nos.), Joint Stock Companies (23 nos.), Co-

operative Societies (31 nos.) and Rural Banks (3 nos.) aggregating 142 entities. The Return

on Equity Capital (ROEC) is measured by the dividend received as proportion outstanding

equity capital. In FY 2014-15, ROEC has increased by 2.38 times over FY 2013-14 because

of more dividend pay-out by the government Companies. The ROEC is calculated at 30.71%

in FY 2014-15 as against 13.67% in FY 2013-14.

The Return on Cash Balance on Investment Account (ROCBI) is measured by interest

realised over cash balance in investment account. Cash Balance on Investment Account

includes Cash Balance, Investment from Cash Balance (G-Sec & T-Bills) and other Cash

Balances. Others Cash Balances include cash with department officers, cash in both sinking

fund and guarantee redemption fund. The interest realised includes interest on 14 Days

Treasury Bills rediscounted during the year. ROCBI has reduced to 3.12% in FY 2014-15 as

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against 6.57% in FY 2013-14 because of very high deposits with R.B.I at the end of FY

2014-15.

Figure 9.10 presents the composition of Non Tax Components. During 2011-12 to 2014-15,

the share of revenue from Non-Ferrous Mining & Metallurgical Industries (Mining Royalty) in

SONTR is highest at 72.3% followed by Interest Receipt (9.4%) and Dividend (8.2%).

Revenue collection from Major, Medium & Minor Irrigation constitutes 6.2% and collection

from Forest & Wild Life contributes 1.8% of the SONTR.

The collection in 2015-16(BE) from Non-Ferrous Mining & Metallurgical Industries (Mining

Royalty) is estimated at 73.5%, followed by followed by Dividend at 12.1% of SONTR.

Revenue collection from Major, Medium & Minor Irrigation is expected at 5.5% and collection

from interest Receipt is pegged at 2.2% of the SONTR. User Charges from water supply &

sanitation, medical facilities and education are expected to contribute 0.8%,0.4% and 0.3%

respectively.

Figure 9.10: Composition of Non Tax Components

9.4%

8.2%

0.7%

0.4%

0.8%

0.2%

1.8%6.2%

72.3%80.4%

Interest Dividend Education

Medical Water Supply & Sanitation Housing

Forest & Wildlife Irrigation Non-Ferrous Mining & Metallurgical Industries

9 / 15


9.8. Central Transfers

Central transfers comprise of shared taxes (devolution from the Centre) and grants. The

Central transfers as proportion to GSDP as well as proportion to Total Revenue Receipt are

presented in Table 9.5.

Table 9.5: Trends in Central Transfers

Year Shared Tax

(Rs. Cr) Grants ( Rs. Cr)

Central Transfer

% of TRR % of GSDP

2011-12 12229.09 8152.19 20381.28 50.62% 9.05%

2012-13 13965.01 6859.73 20824.74 47.40% 8.16%

2013-14 15247.09 8429.42 23676.51 48.37% 8.54%

2014-15 16181.22 12917.50 29098.72 51.05% 9.39%

2015-16 (BE) 19580.00 21066.57 40646.57 57.30% 12.23%

In 2012-13 and 2013 -14, the Central Transfers as a percentage of TRR and GSDP has

declined mainly due to decline in Grants as proportion to both GSDP and TRR. Figure 9.11

presents the trends in grants component.

Figure 9.11: Trends in Grants

3.62%

2.69%3.04%

4.17%

6.34%20.25%

15.61%17.22%

22.66%

29.70%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

20

11

-12

20

12

-13

20

13

-14

20

14

-15

20

15

-16

(B

E)

Gra

nts

to

TR

R /

.

Gra

nts

to

GSD

P /

.

Grants to GSDP / . Grants to TRR / .

9 / 16


In 2012-13 and 2013 -14, the share of grants to Central Transfer has also declined. Figure

9.12 presents the trends in share of grants component in Central transfer.

Figure 9.12: Trends in Share of Grants in Central Transfers

The grants can be broadly divided into Plan grants and non-Plan grants. While non-Plan

grants include Finance Commission mandated grants as well as other (often discretionary)

non-Plan grants, Plan grants broadly include grants for State Plan Schemes, Central Plan

Schemes, Centrally Sponsored Schemes, and Special Plan Schemes (not applicable to

Odisha at present).

The share of central transfer to total Revenue Receipt in case of Odisha has been over 50%

over the years. However, the trend was reversed in 2012-13 and 2013-14 when the Central

transfer fell below 50% due to lower central transfer in shape of grants. However,

consequent upon the decision to route the Central Assistance for 66 restructured CSS

through State Budget, Odisha’s dependence on central transfer has increased to 57.30% in

the year 2015-16 (BE).Figure 9.13presents the composition of different components of

central grants received by the Government of Odisha in recent years. During 2010-11 to

2014-15, in total Grant-in-Aid from Central Government, the share of grants for State Plan

Scheme is highest at 58% followed by Non-Plan grants at 25% and grants for Centrally

Sponsored Schemes at 16%. Block grant which is part of the State Plan Scheme constitutes

33% of total grants and 57% of the State Plan Scheme. In 2012-13, Non Plan Grant was

drastically reduced by 41% over 2011-12.

40.0%

32.9% 35.6%

44.4%

51.8%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

20

11

-12

20

12

-13

20

13

-14

20

14

-15

20

15

-16

(B

E)

9 / 17


Figure 9.13: Composition ofGrants-in-aid

* Block grants is part of State Plan & calculated as proportion of total Grants-in-aid

Table 9.6provides trends in components of central grants received by the Government of

Odisha in recent years.

Table 9.6: Grants Received by Government of Odisha from the Centre

(Rs. in Crore)

Source: Finance Accounts, various issues

9.9. Trends in Functional Classifications of Revenue Expenditure

Revenue expenditures and capital outlay have been fluctuating around 15% and 2% of

GSDP respectively during 2011-12 & 2012-13. Clearly, the intended push to capital outlay

was not materializing despite higher budgetary allocations, primarily because of institutional

Category of Grant 2010-11 2011-12 2012-13 2013-14 2014-15

Grants-in-aid from central government 6806.25 8152.19 6859.73 8429.42 12917.50

a. Non-Plan grants 2111.39 2561.48 1505.49 2729.19 1929.34

b. Grants for state Plan schemes 3279.21 3853.22 3483.61 3429.46 10886.18

of which, Block grants 3041.05 3451.77 3219.57 3095.50 1331.47

c. Grants for central Plan schemes 192.01 108.60 183.00 121.67 101.90

d. Grants for centrally sponsored schemes 1223.64 1628.89 1687.63 2149.11 8.26

0.00%

20.00%

40.00%

60.00%

No

n-P

lan

gra

nts

Gra

nts

fo

r st

ate

P

lan

sch

em

es

Blo

ck g

ran

ts

Gra

nts

fo

r ce

ntr

alP

lan

sch

em

es

Gra

nts

fo

r ce

ntr

ally

spo

nso

red

sch

em

es

25.1%

57.8%

32.8%

1.6%

15.5%

9 / 18


constraints. However, it has increased to 2.8%& 3.6% in 2013-14& 2014-15 respectively.

The Budget estimates for the year 2015-16 show that these constraints may be easing up

and the capital outlay is expected to be at4.6% of GSDP. Simultaneously, revenue

expenditure is expected to increase significantly to 19.8% of GSDP. With the increase in

revenue receipts in 2014-15& 2015-16(BE), the increase in both revenue expenditure and

capital outlay represent a fuller utilization of available resources under the constraint of the

fiscal responsibility legislation as compared to the immediately preceding years.

The structure of revenue expenditure in terms of distribution among broad groups of

expenditure remains stable, with small year-to-year changes. Figure 9.14 summarizes the

structure of revenue expenditure.The share of General, Social & Economic Services is

fluctuating over the years where as the share of Assignments to Local Bodies shows a

decreasing trend from 2013-14. It may, however, be noted that there are additional transfers

to local bodies through some of the other budgetary categorieswhich is determined by the

implementation of the awards of the State Finance Commission. The changing composition

outlined above is generally considered to be in the desirable direction.

Figure 9.14: Composition of Revenue Expenditure in Odisha (%)

0

10

20

30

40

50

60

70

80

90

100

2011-12 2012-13 2013-14 2014-15 2015-16 (BE)

100.00 100.00 100.00 100.00 100.00

31

.53

32

.49

30

.01

28

.41

30

.12

41

.37

39

.17

41

.04

41

.00

39

.57

25

.19

26

.67

27

.00

28

.99

28

.92

1.9

1

1.6

8

1.9

6

1.6

0

1.3

9

Total Revenue Expenditure A. General Services

B. Social Services C. Economic Services

D. Assignments to Local Bodies and PRIs

9 / 19


9.10. Trends in composition of Committed Revenue Expenditure

Another way of looking at the composition of revenue expenditures is to consider the

proportion pre-empted by committed expenditures, defined here as the contractual

expenditures for salaries and wages of government employees, pensions and retirement

benefits of retired government employees and interest payments. Figure 9.15 shows the

share of such contractual expenditure in total revenue expenditures is fluctuating over years.

It is estimated that the committed expenditure was about 43% of the total revenue

expenditure in 2013-14 which has been increased to 48% in 2014-15 & 2015-16(BE). These

trends are to be reversed to allow a higher proportion to directly development-oriented

policies.

Figure 9.15: Composition of Committed Revenue Expenditure

9.11. Trends in components of Revenue Expenditure

The composition of revenue expenditure by budgetary categories in more detail is provided

in Table 9.7. While pensions are seen to be outstripping interest payments in recent years,

expenditure on each of the key areas within social and economic services is seen to have

grown apace; only the expenditure on medical and public health seems to be lagging

somewhat. Given its priority, the relatively slow growth of expenditures on this category

needs to be corrected.

26.20 24.89 24.12 30.05 27.54

13.68 14.07 13.0112.55 13.05

7.43 7.34 6.335.50 7.37

52.69 53.70 56.54 51.90 52.04

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011-12 2012-13 2013-14 2014-15 2015-16 (BE)

Salaries and Wages Pensions Interest Payments Others

9 / 20


Table 9.7: Composition of Revenue Expenditure in Odisha

(Rs. Crore)

Item 2011-12 2012-13 2013-14 2014-15 2015-16

(BE)

Total Revenue Expenditure 34660.24 38237.56 45617.75 51135.74 65838.99

A. General Services of which 10928.58 12423.26 13689.41 14528.86 19828.82

1. Interest Payments 2576.43 2807.23 2888.22 2810.27 4850.00

2. Pensions 4740.76 5379.37 5935.17 6416.62 8593.20

B. Social Services of which 14338.07 14976.56 18721.55 20964.13 26054.33

1. General Education 6647.48 7050.73 8065.60 9822.05 11738.83

2. Medical and Public Health 1129.34 1467.34 1630.98 2512.66 3183.32

3. Water Supply and Sanitation 563.16 598.39 719.94 1051.98 1901.62

C. Economic Services of which 8732.47 10196.24 12314.59 14825.38 19037.42

1. Agriculture and Allied Services 3165.99 4104.23 4701.12 5613.46 6353.87

2. Rural Development 1836.96 2178.70 2983.63 4446.25 6760.34

3. Irrigation and Flood Control 860.24 1043.22 1397.05 1376.40 1807.34

4. Roads and Bridges 1177.10 1536.76 1693.89 1884.36 2131.69


661.11 641.49 892.20 817.37 918.42

Memo Item:

Salaries and Wages 9081.77 9515.42 11004.89 15365.21 18129.70

Source : Finance Accounts (various issues) and Budget Document, 2014-15

Table 9.8 provides the sector wise contribution to the revenue expenditure. The

Developmental services Sector contributes around 68% of the total revenue expenditure. In

the Developmental Sector, more emphasis is given to Social Services Sector as compared

to Economic Services Sector. This is on account of the outcome of policy orientation towards

the inclusive growth. General Education in Social Services Sector and Rural Development in

Economic Services Sector are given higher allocation. Medical and Public Health, Water

Supply & Sanitation, Irrigation & Flood Control and Roads & Bridges need more allocation

9 / 21


for operation & maintenance of capital assets as theses developmental sub sectors create

significant positive externalities.

Table 9.8: Composition of Revenue Expenditure in Odisha (in percentage)

Item 2011-12 2012-13 2013-14 2014-15 2015-16

(BE)

Total Revenue Expenditure 100.00 100.00 100.00 100.00 100.00

A. General Services 31.53 32.49 30.01 28.41 30.12

Interest Payments 7.43 7.34 6.33 5.50 7.37

Pensions 13.68 14.07 13.01 12.55 13.05

B. Social Services 41.37 39.17 41.04 41.00 39.57

1. General Education 19.18 18.44 17.68 19.21 17.83

2. Medical and Public Health 3.26 3.84 3.58 4.91 4.84

3. Water Supply and Sanitation

1.62 1.56 1.58 2.06 2.89

C. Economic Services 25.19 26.67 27.00 28.99 28.92

1. Agriculture and Allied Services

9.13 10.73 10.31 10.98 9.65

2. Rural Development 5.30 5.70 6.54 8.69 10.27

3. Irrigation and Flood Control 2.48 2.73 3.06 2.69 2.75

4. Roads and Bridges 3.40 4.02 3.71 3.69 3.24


1.91 1.68 1.96 1.60 1.39

Memo Item:

Salaries and Wages 26.20 24.89 24.12 30.05 27.54

(B+ C) Developmental Services

66.56 65.84 68.04 69.99 68.49

9.12. Efficiency in Revenue Expenditure Revenue expenditure neither creates assets nor reduces a liability and generally, it is

incurred on normal running of the government departments, operation and maintenance of

existing infrastructural services. It is a short period expenditure and recurring in nature which

is incurred every year (as against capital expenditure which is long period expenditure and

nonrecurring in nature). Since, Revenue Expenditure is recurring and immediate in nature,

it should be matched with non-tax revenue of the current accounting period. Efficiency in

Revenue Expenditure of a sector is measuredby the non-tax revenue mobilized from that

particular sector. This is essentially the cost coverage ratio. To measure the efficiency,

Revenue Expenditure in Economic Services Sector is taken into consideration. This

efficiency measurement is Return on Revenue Expenditure (RORE). The average RORE for

the State is estimated at 52.8% as against average of 20.7% for the consolidated States in

9 / 22


India for the period from 2010-11 to 2014-15. This indicates that approximately 53% of the

Revenue Expenses in the Economic Services Sector is covered by the non-tax revenue

collection from the Economic Services Sector in the State as compared to only 21% for all

the States in India.

9.13. Trends in components of Capital Outlay

The thrust on capital outlay discussed above is clearly brought out in Figure 9.16. The

compound annual average growth (CAGR) rate of capital expenditure during 2011-12 to

2015-16(BE) has been 26% which is mainly contributed by 35% CAGR in in capital outlay.

This impressive rise in capital outlay is attributed to 34% rise in capital outlay on CAGR

basis in the Developmental Services Sector. In the Developmental Sector, the Social Sector

and Economic Sector Services Sector have contributed 37% and 33% CAGR respectively

during this time period. In a relatively less developed state like Odisha, the importance of

these expenditures for sustained economic growth need hardly be emphasized. As a result,

the capital outlay to GSDP ratio has significantly increased from 2% in 2011-12 to 4.56% in

2015-16(BE).

Figure 9.16: Capital Expenditure in Odisha (Rs.Crore)

4,4

96

5,6

22 7

,75

6

11

,07

5

15

,14

9

62

1.0

1

21

6.0

3

46

3.5

5

35

8.0

0

59

3.0

1

23

27

.76

31

79

.86

22

93

.22

41

11

.45

29

06

.70

7,4

45 9,0

18

10

,51

3

15

,54

4 18

,64

9

2011-12 2012-13 2013-14 2014-15 2015-16 (BE)

Capital Outlay* Loans and Advances (Gross) Debt Repayment (Gross)

Transfer to Contingency Fund Total Capital Expenditure

9 / 23


Figure 9.17 depicts the comparative position of Capital Outlay in Non-Developmental

Expenditure to total Non-Developmental Expenditure and Capital Outlay in Developmental

Expenditure to total Developmental Expenditure for the period 2013-15 and 2014-15.

Figure 9.17: Capital Outlay Ratioin Developmental and Non Developmental Sector

DE: Capital Outlay in Developmental Expenditure, NDE: Capital Outlay Non Developmental Expenditure

The discernible rise in share of Capital outlay and Developmental Expenditure in total

expenditure confirms the State’s commitment to strengthen the quality of expenditure and to

sustain the higher, sustainable andinclusive economic growth of the state.

9.14. Analysis of Debt Stock Position

At the time of introducing the fiscal responsibility legislation, the outstanding debt to GSDP

Ratio (Debt Stock Ratio) of Odisha was close to 48% coupled high debt servicing ratio

(IPRR)4 of 30% that raised the specter of non-sustainability of such a high level of debt,

particularly because states in India have no way of financing their deficits except through

additional borrowing. The state finances have come a long way from that stage in the

intervening years; the debt stock ratio and debt servicing ratio have improved to13.97% and

4.93% respectively in 2014-15. With deficits reigned in, there is no apprehension regarding

4 Debt Servicing Ratio is defined as Interest Payment to Total Revenue Receipt Ratio(IPRR)

14.04%14.95%

5.68% 5.18%

0.00%

5.00%

10.00%

15.00%

FY 2

01

3-1

4

FY 2

01

4-1

5

DE / . NDE / .

9 / 24


sustainability at all. In fact, the State has not even made any recourse to the Reserve Bank

of India’s overdraft facility in recent years.

To assess the impact of FRBM Act, 2005 on the management of debt position of the State,

the trends in debt indicatorsduring the period 1995-96 to 2004-05 (Pre FRBM Period: 10

Years) and 2005-06 to 2014-15 (Post FRBM Period: 10 Years) are examined. Figure 9.18

presents the comparative position of debt indicators.

Figure 9.18: Comparative Position of Debt Indicators in Pre & Post FRBM Period

The average outstanding debt to GSDP Ratio (Debt Stock Ratio) has declined significantly

from 39.91% during Pre FRBM Period to 23.57% in Post FRBM Period showing an

improvement of 16.34%. Similarly,the average Debt Servicing Ratio (IPRR) has declined

significantly from 29.66% during Pre FRBM Period to 11.44% in Post FRBM Period showing

an improvement of 18.22%. The FRBM stipulation for debt stock ratio is 29.5% and for debt

servicing ratio is 15% for 2014-15.

One of the reasons for the continuous improvement in debt stock ratio and debt servicing

ratio is the less borrowing at lower cost to keep fiscal deficits and debt servicing ratio below

the prescribed level stipulated in the fiscal responsibility legislation.

In order to have a clear scenario, table 9.9 presents the descriptive statistics of debt

indicators in both Pre and Post FRBM Period.

0.00%

10.00%

20.00%

30.00%

40.00%

Pre

FR

BM

Po

st F

RB

M

39.91%

23.57%

29.66%

11.44%

Debt Stock / . IPRR / .

9 / 25


Table 9.9: Descriptive Statistics of Debt Indicators in Pre and Post FRBM

Period

Pre FRBM Period Post FRBM Period

Debt Stock IPRR Debt Stock IPRR

Mean 39.91% 29.66% 23.57% 11.44%

Std. Dev. 7.52% 5.64% 9.81% 6.64%

Median 37.80% 28.12% 19.81% 9.20%

Minimum 28.81% 21.03% 13.92% 4.93%

Maximum 50.73% 40.22% 42.84% 26.25%

Range 21.92% 19.19% 28.92% 21.32%

The average cost of Borrowing5 during Pre FRBM Period is estimated at 10.66% has

declined to 7.75% during Post FRBM Period. The lower cost of borrowing is represented by

the trend line in figure 9.19. The cost of borrowing was at 10.08% and 10.95% in 1995-96

and 1996-97 respectively. It has come down to 7.54% and 6.86% during 2013-14 and 2014-

15.

Figure 9.19: Trends in Cost of Borrowing

Average Interest Payment of the State is 1.03% of GSDP compared to all State average

of 1.50% during 2012-13 to 2014-15. During the same period, the Debt Stock of the

State is at 14.40% of GSDP compared to all State average of 21.27%. The Interest

5Cost of Borrowing t = Interest Paymentt/ Average ( Debt Stock t&Debt Stock t-1)

10.1%11.0%11.3%10.9%

7.5%

11.7%12.6%

11.1%

9.6%

10.1%10.1%

8.7%8.6%

7.9%8.2%8.0%

6.6%7.3%7.5%

6.9%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

19

95

-96

19

96

-97

19

97

-98

19

98

-99

19

99

-00

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

20

09

-10

20

10

-11

20

11

-12

20

12

-13

20

13

-14

20

14

-15

Pre FRBM Post FRBM Period

Trend Line Line

9 / 26


payment to Revenue Receipt ratio is estimated at about 5.74% during 2012-13 to 2014-

15. This indicates that the debt stock of Odisha is at sustainable level. Figure 9.20

presents the comparative position of the State with all States at consolidated level.

Figure 9.21 presents the trends in debt indicators of the State since 2010-11.

Figure 9.20: Comparative Positions of Debt Indicators

Figure 9.21 presents the trends in debt indicators of the State since 2010-11. The

continuous improvement both in debt stock ratio and debt servicing ratio is also

witnessed in these last five years. During these last five years, the debt stock has

declined by 5.85% and debt servicing ratio by 4.27%.

The compound average growth rate (CAGR) of Debt stock during these last five years is

calculated at only 2.54%. The Interest payment has witnessed a negative compound

average growth rate (CAGR) of (-) 2.12%.

1.03%

1.50%

14.40%

21.27%

0.00%

0.50%

1.00%

1.50%

2.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Od

ish

a All

Stat

es

IPR

/ .

De

bt

Sto

ck /

.

IPR / . Debt Stock / .

9 / 27


Figure 9.21: Trends in Debt Indicators: 2010-11 to 2014-15

9.15. Analysis of Debt Sustainability and Debt Solvency

Fiscal Policy is sustainable if the Government isable to service the Debt Stock over the time

periods when the interest payment is due. If the Government is insolvent and still able to

continue to service the debt, then it is borrowing more to repay the interest payment.

Therefore, Solvency is a necessarycondition for sustainability. Solvency is a long-term

aspect of the debt position of the Government; sustainability is a short term aspect.

To achieve both solvency andsustainability of public debt, the following condition is to be

adhered.

d≤c< g

Where

„d‟is the growth rate of debt stock, „c‟ is the cost of borrowing and „g‟ isgrowth rate of

nominal GSDP.

The debt sustainability and debt solvency of Post FRBM is compared with Pre FRBM Period.

9.20%

6.40% 6.39% 5.90%4.93%

19.81%

17.13%

14.88%13.95% 13.97%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0%

5%

10%

15%

20%

25%

20

10

-11

20

11

-12

20

12

-13

20

13

-14

20

14

-15

IPR

R /

.

De

bt

Sto

ck /

.

IPRR / . Debt Stock / .

9 / 28


The Pre FRBM Period is of 10 years spanning from 1995-96 to 2004-05 and the Post FRBM

Period is also of 10 years spanning from 2005-06 to 2014-15. Table 9.10 presents the

estimated variables.

Table 9.10: Pre FRBM and Post FRBM Debt Sustainability Parameters

Variables Pre FRBM Post FRBM

d 15.62% 1.92%

c 10.66% 7.75%

g 10.36% 15.48%

“d” is the compound average growth rate in debt stock, “g” is the compound average

growth rate of nominal GSDP. “c” is the cost of borrowing. The cost of borrowing is

calculated as interest payment as proportion to average debt stock of last year and current

year.6

It is observed that the condition of d ≤ c < gis not satisfied during Pre FRBM Period.

Therefore, the debt was not sustainable, as was well as not solvent. The state was in debt

trap condition. However, in Post FRBM Period, the condition of d ≤ c < gis satisfied.

Therefore, both debt sustainability and solvency is achieved in Post FRBM Period. The fiscal

policy of the State during the Post FRBM Period wherein there has been a significant decline

in both Debt to GSDP ratio and Debt Servicing Ratio has transformed the State to a debt

solvency situation.

9.16.Composition of Out Standing Debt Stock and Outstanding Liability

The Outstanding Public Debt and Outstanding Borrowing from State Provident Fund

constitute Outstanding Debt Stock of the State. Outstanding Public Debt, Outstanding

Borrowing from Public Accounts and Contingency Fund constitute total Liability of the State.

During 2010-11 to 2014-15, the share of debt stock to total liability is estimated at 80%. The

public debt andState Provident Fund contribute 63% and37% of the total debt stock. The

Public Debt, Public Account and Contingency Fund constitute 50%, 49% and 1% to the total

6 Interest Payment is also made on quarterly and semi-annual basis.

9 / 29


liability respectively. The trend in composition of liability as proportion to GSDP7 is given in

table 9.11.

Table 9.11: Trends in Composition of Liability (% of GSDP)

Liabilities 2010-11 2011-12 2012-13 2013-14 2014-15

Consolidated Fund 12.96 10.93 9.13 8.41 8.67

1 (a+b+c+d+e+f) Public Debt 12.96 10.93 9.13 8.41 8.67

a Open Market Borrowings (Net SLR based Market borrowings) 3.12 2.27 1.49 1.05 1.47

b

Borrowings from Banks and FIs/ Negotiated Loans 1.43 1.47 1.32 1.42 1.61

c Special Securities issued to NSSF 4.28 3.77 3.37 3.24 3.25

d Bonds/ Debentures which are issued by the State Govt.t 0.28 0.20 0.13 0.08 0.04

e Loans from Centre (Net) 3.84 3.23 2.82 2.61 2.30

f Other Liabilities 8.60 7.87 6.48 5.89 6.50

2 (a+b+c) Public Accounts 10.32 10.15 10.01 9.71 9.41

a State Provident Funds 6.86 6.20 5.74 5.54 5.30

b Small Savings, Insurance and Pension Funds, Trust and Endowments, etc 0.00 0.00 0.00 0.00 0.00

c Other items in Public Accounts of which 3.98 3.95 4.26 4.17 4.11

i. Deposits 1.53 1.58 2.02 2.15 2.22

Bearing Interest 0.03 0.03 0.03 0.02 0.01

Not Bearing Interest 1.50 1.55 1.99 2.14 2.21

ii. Reserve Funds/ Sinking Fund 2.46 2.37 2.24 2.02 1.89

Bearing Interest 0.01 0.13 0.07 0.02 0.01

Not Bearing Interest 2.44 2.24 2.17 2.00 1.88

3 Contingency Fund 0.01 0.17 0.16 0.09 0.13

Total Liabilities (1+2+3) 23.28 21.25 19.30 18.21 18.21

7 GSDP is at 2011-12 Base.

9 / 30


Figure 9.22 presents the trends in the composition of debt stock to GSDP Ratio. The

declining trend is observed in most of the components of the debt stock. Outstanding debt

on account of State Provident Fund as proportion to GSDP has declined from 6.86% in

2010-11 to 5.30% in 2014-15. Debt on account of NSSF as proportion to GSDP has declined

from 4.28% in 2010-11 to 3.25% in 2014-15. However, the negotiated loan from the

Financial Institutions and Banks has increased from 1.43% of GSDP in 2010-11 to 1.61% in

2014-15. Debt due to Open Market borrowing through State Development Loan has

decreased from 3.12% of GSDP in 2010-11 to 1.47% of GSDP in 2013-14. Loansfrom

Centre has also come down from 3.84% of GSDP in 2010-11 to 2.30% in 2014-15.

Figure 9.22: Composition of Debt Stock as % of GSDP

Figure 9.23 presents the dispersion of the outstanding debt in 2014-15. State Provident

Fund contributes 38% of the total debt followed by Special Securities issued to NSSF(23%),

Loans from Centre(16.50%), institutional borrowings(11.50%) and Open Market Borrowing

(10.55%)

0

1

2

3

4

5

6

7

20

10

-11

20

11

-12

20

12

-13

20

13

-14

20

14

-15

3.12

2.27

1.49

1.05

1.471.43 1.47 1.32 1.42

1.61

4.28

3.77

3.37 3.24 3.25

3.84

3.23

2.822.61

2.30

6.86

6.20

5.745.54

5.30

Open Market Borrowings (Net SLR based Market borrowings)

Borrowings from Banks and FIs/ Negotiated Loans

Special Securities issued to NSSF

Bonds/ Debentures which are issued by the State Govt.t

Loans from Centre (Net)

State Provident Funds

9 / 31


Figure 9.23: Dispersion of Debt Stock at the end of 2014-15

One of the reasons for the continuous decline in debt components is to keep fiscal deficits

below the prescribed level under the fiscal responsibility legislation which reduces net debt

burden of the State.If growth in GSDP exceeds the growth in outstanding debt, debt to

GSDP ratio will decline and will be below the FRBM stipulation. Higher growth rate in GSDP

compared to growth in debt stock coupled with low cost of borrowing has made the fiscal

policy of the State sustainable and has created solvency in debt.FRBM legislation as a fiscal

policy rule has helped to achieve stability in State Finance and efficiency in expenditure

allocation.

Now that the State’s finances are considerably stable, the tasks of further improving the

quality expenditure, regular expenditure review, expanding the coverage of public services,

and of investing in social and physical infrastructure are very critical to achieve higher

inclusive growth rate on sustainable basis.In order to fulfill this objective the State has to go

for higher capital receipts to fund capital outlay in developmental sectors as there is capacity

to sustain additional debt burden and the State economy has reached a stage wherein it can

absorb higher capital outlay after the fiscal stabilization.

10.55%

11.50%

23.28%

0.26%

16.46%

37.96%

54.41%

Open Market Borrowings (Net SLR based Market borrowings)Borrowings from Banks and FIs/ Negotiated LoansSpecial Securities issued to NSSFBonds/ Debentures which are issued by the State Govt.tLoans from Centre (Net)

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