High borrowing from several countries outside the budget, guarantees for future revenues, loans secured against public assets such as hospitals, courts and parks and rising energy costs were announced by the center at the meeting under the chairmanship of Prime Minister Modi, ET has learned. The RBI article had raised concerns about the fiscal strain in many indebted countries. The Ministry of Finance’s overview presented at the meeting highlighted the concerns of the financial situation in several countries. Off-balance sheet and off-budget borrowing were marked with a red flag as a key “disruption” in this summary, ET summarizes.
Telangana leads with Rs 56,767 million in borrowing between 2019-20 and 2021-22, which is over 4.5% of its GDP. Borrowing by Sikkim and Andhra Pradesh was close to 2.5% of GDP, while Uttar Pradesh and Kerala have given in to out-of-budget borrowings of Rs 24,891 million and Rs 10,130 million respectively, according to data shared at the meeting.
“Some states are taking out mortgages on properties such as local parks, collection offices, the Taluk office, the courts, hospitals, hospitals, and the state revenue escrow,” the meeting said.
The countries that earned the most money by accumulating future income between 2019-20 and 2021-22 are Telangana, Uttar Pradesh, Punjab, Madhya Pradesh and Himachal Pradesh. Although the AP’s fundraising is up to 1.88% of the estimated GSDP 2022-23, the UP is at 0.87%, the Punjab is up with 0.46% of the GSDP, Madhya Pradesh at 0.21% and Himachal Pradesh at 0, 05% of GSDP.
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Another major “disruption” that the center has flagged is rising unpaid energy bills. Total government / ICT debt to manufacturing companies, excluding state-run companies, is ISK 1,01,442 million – ISK 26,397 million is solely due to large-scale power plants.
Another Rs 62,931 million is due to distribution companies. Discoms are actually waiting for Rs 76,337 million for grants from states, it was shared at the meeting. As this is the main cause of continuing difficulties in the energy sector, the Center warned that, although rarely invoked, tripartite agreements allow CPSE fees to be deducted from tax returns to the country concerned. As of May 31, 2022, Maharashtra matured to Gencos at Rs 21,565 million, followed by Tamil Nadu at Rs 20,990 crore, Andhra Pradesh at Rs 10,109 crore and UP at Rs 8,230 million due to companies’ allocations to SCOM allocation divisions. are equally concerned with Telangana owing Rs 11,935 million, Maharashtra Rs 9,131 million, Andhra Pradesh Rs 9,116 million and Karnataka Rs 6,600 million as of March 31st.
The highest equilibrium concentration due to DISCOMS from states is recorded in Uttar Pradesh with 18,940 million rupees due since Madhya Pradesh, Rajasthan and Punjab.
The third “trend” that is pointed out is of outstanding guarantees that could threaten if applied, the center warned.
The outstanding guarantees of Telangana and Sikkim as of March 31 are well over 10% of the estimated GSDP for 2022-23, Andhra Pradesh and Uttar Pradesh do not perform better with 8% -9%, Rajasthan is forecast in the range of 6% -8% as and Meghalaya, according to the center’s data.
The Center pointed out at the meeting that the revenue deficit has increased and the central government’s own revenue collection has stagnated as a percentage of GDP during the Finance Committee’s 14th allocation period (2015-2020).
Although countries’ own revenues to the GSDP decreased from 7.69% in the years 2015-16 to 7.31% in the years 2019-20, the income deficit has increased from 0.04% to 0.66% over the same period.
The rise in debt in several countries is worrying – the annual growth rate of outstanding debt in 2015-20 was 30.6% in Telangana and over 20% in Chhattisgarh, Odisha and Arunachal Pradesh. Tamil Nadu is not a consolation mourning against 19.2% while Andhra Pradesh, Karnataka and Sikkim are all over 16%.
Furthermore, mandatory expenditure (including government wage costs plus interest payments) on income is so high in some cases that there is “almost no scope for doing anything new”, it said.
This is up to 86% for Punjab, 78% and 75% respectively for Kerala and Uttarakhand and over 62% for 11 states including Himachal Pradesh, Sikkim, Haryana, Rajasthan, Meghalaya, West Bengal, Andhra Pradesh and Nagaland .
Fiscal spending has also been low on average in 2015-2020 in some countries affecting future economic growth prospects – ranging from 7% -10% in Punjab, Kerala, West Bengal and Maharashtra.
In fact, the centers are said to have cited examples from Sri Lanka and Pakistan, such as poor incomes, inadequate spending controls, growing fiscal deficits and increased borrowing even before the pandemic has plunged them into an economic crisis.
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