The XV Finance Commission has suggested that the State should continue its efforts to sustain higher revenue from its own sources, both tax and non-tax.
The Commission appreciated the State government for its low dependence on Central transfers indicating greater resilience on own resources that most other States. The Central transfers constituted less than 27% of the total revenue receipts of the State in 2018-19. The State also achieved relatively higher own tax receipts to GSDP ratio which stood at 7.5 the same year.
Commenting on the fiscal discipline, the commission said the fiscal deficit-GSDP ratio of the State jumped from 3.3% in 2015-16 to 5.4% the next year and thereafter, declined to 3.1% in 2018-19. The debt-GSDP ratio rose from 17% to 22.9% between 2015-16 and 2018-19.
The State resorted to additional borrowings under Article 293(3) for three years since 2016-17 and this was over and above the 3% fiscal deficit – GSDP ratio.
“The State therefore needs to bring down its deficits and debt to sustainable levels,” the commission said. Quoted the observations made by the Auditor General, Telangana, the commission said if off-budget borrowings of the State amounting to ₹29,965 crore in 2016-17 were accounted for, the debt-GSDP ratio would jump by more than 5 percentage points to 24.9% in the same year.
The Auditor General observed that the State registered revenue surplus of ₹1,386 crore during 2016-17 and this was overstated by ₹6,778 crore on account of irregular accounting. “Thus the State had, in fact, revenue deficit of ₹5,392 crore in 2016-17,” the Commission said in its report.
The commission also expressed concern that the fiscal deficit of ₹35,281 crore was understated by ₹2,500 crore due to crediting of borrowed funds as revenue receipts. “The downside risks on the State’s fiscal situation remain a major challenge,” the commission said. On the FRBM compliance, the commission said the State did not adhere to FRBM targets of Fiscal Deficit - GSDP ratio during the period 2015-16 to 2017-18. However, the debt-GSDP ratio remained within the target during the same period.
