When it comes to financial health Haryana, Delhi, Orissa are the best performing states in the country, while Bihar, Jharkhand and Kerala need to cut both fiscal and revenue deficits, an Assocham study has shown. Haryana had the minimum fiscal deficit of 0.6 per cent in financial year 2006-07, though marginally up from 0.3 per cent in the previous year.
New Delhi was at the second spot with 0.7 per cent fiscal deficit while its revenue account showed a surplus of 3.57 per cent.
Though Orissa recorded the fiscal deficit of 1.1 per cent in FY'07, higher than 0.4 per cent in FY'06, it managed to remain well under the three per cent figure as recommended by the 12th Finance Commission.
Its revenue surplus has increased from 0.76 per cent to 0.9 per cent during the same period. Gujarat (2.5 per cent), Chhattisgarh (2.6 per cent), Tamil Nadu (2.7 per cent) and Karnataka (2.8 per cent) are the other states which have been able to keep their expenditures in the financial year 2006-07 in line with the target of 3 per cent fiscal deficit. But in view of the continuous high fiscal and revenue deficits witnessed by Bihar, Jharkhand and Kerela, the financial stability of these states may become a matter of concern, the Assocham Eco Pulse study revealed.
As per the study, the gap between the total receipts and expenditure of the state governments, as measured by the ratio of gross fiscal deficit to gross state domestic product (GSDP), has been widening during last two years. The study is based on the data provided by RBI, ministry of finance and budget documents of the states.
Bihar, which tops the chart on this count, has recorded a rise in the fiscal deficit from 6.1 per cent in the financial year 2005-06 to 10.4 per cent in FY06-07. The revenue earnings also fell short of the revenue expenses by 1.14 per cent in FY'07.
"There are many factors which can be attributed to the wide fiscal gap in some of the states, including growing interest payments, pension liabilities, unrestrained administrative expenditures, low growth in tax collections," Assocham President Venugopal Dhoot said. Jharkhand is also facing the problem of huge fiscal deficit of 10.1 per cent in FY07, though it has recorded a marginal decline from 10.3 per cent in FY06.
Kerela is facing huge budgetary imbalances with the fiscal deficit rising from 3.5 per cent in FY06 to 6.1 per cent in FY07 and revenue deficit burgeoning to 4.36 per cent in financial year 2007 from 2.6 per cent in the previous year. But the collective figures of the states present a different picture.
The aggregate revenue deficit has been continuously declining in the past two years from 1.2 per cent in FY05 to 0.04 per cent in FY06, the financial year 2007 witnessed revenue surplus of 0.01 per cent. The overall gross fiscal deficit of the state governments, measured in proportion to GDP, has witnessed a marginal increase from 2.4 per cent in FY06 to 2.6 per cent in FY07.
The 12th Finance Commission has set the target for the states to achieve a revenue balance by 2008-09 and restrict fiscal deficit to 3 per cent by 2009-10. While eight states have become revenue surplus in FY07, seven states have reduced their fiscal deficit within the limit of 3 per cent.