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Transcript of Resource Mobilization for State Plan By S.Subramanya Secretary ( Budget & Resources) Government of...
Resource Mobilization for State Plan
By
S.Subramanya
Secretary ( Budget & Resources)
Government of Karnataka
Presentation Plan
• Concept of government Finances
• How availability of resources for Plan are estimated?
• Karnataka Fiscal Responsibility Legislation and imposition of restrictions.
• Estimation of resources for 11th plan
Part 1
Concept of Government Finances
Government Finances
Consolidated
Fund
CF
PublicAccount
Revenue Deficit
Fiscal Deficit
Debt
RevenueAccount
Capital Account
RevenueExpenditure
CapitalExpenditure
Expenditure
Tax
Non Tax
GoI Grants
Receipts
Devolution
Non Debt Capital Receipts
State Debt
Revenue Surplus – not equivalent to accumulation of profit or cash
RevenueExpenditure
CapitalExpenditure
RevenueReceipts
Revenue Deficit
This portion of fiscal deficit is being used to fund Revenue Expenditure
Fiscal Deficit
The State erodes into the savings made by the household and private sector to fund its current expenditure thereby reducing the net savings in the economy and thus hampering growth
Receipts Expenditure
The State generates savings in the public sector adding to the net savings in the economy augmenting the savings of household sectors and by using this surplus to fund capital expenditure stimulating growth
State Debt
Revenue Surplus – not equivalent to accumulation of profit or cash
RevenueExpenditure
CapitalExpenditure
RevenueReceipts
Fiscal Deficit
This Revenue Surplus goes into funding the extra capital expenditure
Receipts Expenditure
Revenue Surplus
Why should there be no Revenue Deficit
• Revenue Deficit implies that the Revenue Expenditure of the State is greater than the Revenue Receipts.
• The State borrows to meet even the current expenditure• Basic Principle: borrowings should never fund current
expenditure but should be used only for Capital Expenditure
• Growth depends on the Savings made by Household Sector and Public Sector,
• Revenue Deficit indicates the extent to which State Government eats into the household and private savings to meet its current expenditure – RD is detrimental for growth
• For growth, even government should generate (revenue) surplus and use it for capital expenditure
Why should Fiscal Deficit be restricted?
• Fiscal deficit is the difference between the total expenditure and the non-debt receipts which is met by borrowings
• Fiscal Deficit per se is not bad provided– It is kept within a sustainable limit– There is no revenue component
• Excessive fiscal deficit implies more borrowings leading to higher interest payments which would crowd out development expenditure in future
• Fiscal Deficit causes intergenerational inequity and thus governments need to be cautious
Part 2
How availability of resources for Plan are estimated?
SOTR
SONTR
Devolution
Non-Plan Grants
+
Non Plan Non Devlp Exp
Non Plan Devlp Exp
+
-
Balance of Current Revenues
Non-Plan Capital Receipts
Non-Plan Capital Expenditure
- Miscellaneous Capital Receipts
Provident Fund
Small Savings
IR
EBR
+ IEBR
NCA
ACA for EAPs
Other ACA
Central Assistance to State Plan
+
Market Borrowings
Negotiated Loans
Financial R
esources for A
nnual Plan
Part 3
Karnataka Fiscal Responsibility Legislation and imposition of
restrictions.
Fiscal Legislations
• Karnataka Fiscal Responsibility Act– (Consolidated) Revenue Deficit to be eliminated– Fiscal Deficit to be limited to 3% of GSDP– Any additionality should be offset by saving elsewhere
or additional resources within above parameters
• Karnataka Ceiling on Government Guarantees Act– Outstanding Guarantees to be limited to 80% of the
Revenue Receipts of one year prior to previous year
Fiscal Deficit
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
1999-00 2000-01 2001-02 2002-03 2003-2004
2004-05 2005-06 2006-07
Fiscal Deficit
Trends in Fiscal Deficit
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
1999-00
2000-01
2001-02
2002-03
2003-2004
2004-05
2005-06
2006-07
Revenue Receipts
Revenue Expenditure
Trends in Revenue Receipts and Expenditure
Result of Fiscal correction
• Revenue deficits have been eliminated. Fiscal deficit is contained with in 3 % of GSDP.
• Debt stock is less than 33% of GSDP. Interest payments are less than 14 % of TRR. Expenditure on salary and pension is less than 30% of TRR.
• Expenditure on capital formation has increased. Revenue surplus is being utilized for capital formation.
• The state has received the fiscal Incentive facility provided by the 11th Finance commission. The benefit of Debt consolidation and debt waiver announced by the 12th Finance Commission has also been provided by GOI.
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
1992-
93
1993-
94
1994-
95
1995-
96
1996-
97
1997-
98
1998-
99
1999-
00
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
AP BE A/c
Ability of the State in Financing the annual plans
Post Fiscal reforms challenges
• Conserving revenue streams. • Ensuring efficiency in expenditure. • Increasing allocation of resources to the social
sectors like health and education, social welfare and infrastructure development.
• Targeting of subsidies and reducing non targeted subsidies.
• Promoting capital formation for durable growth.
Part 4
Estimation of resources for 11th plan