Topic started by Namakkal (@ 109.a.001.syd.iprimus.net.au) on Wed Oct 15 07:17:00 .
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http://www.rediff.com/money/2003/sep/08fiscal.htm


3 more states in fiscal responsibility fold

Anindita Dey in Mumbai | September 08, 2003 10:36 IST


Punjab, Tamil Nadu and Kerala have become the new signatories to the fiscal responsibility legislation to provide legal and institutional framework for fiscal reforms.

Fiscal reforms under this legislation have been of critical importance in recent years in terms of adoption of fiscal prudence and discipline in state budgets.

Karnataka was the first state to sign the Bill which was later notified as the Fiscal Responsibility Act in the Karnataka Gazette in August 2002.

As per the RBI report on state finances for the year 2003-03, the state level initiatives on the receipt side have measures aiming at enhancement of revenue receipts through revision of tax rates, broadening of tax base and improved tax compliance.

The institutional reforms proposed aims basically on fiscal stability and sustainability.

While each state has the bill tailor-made to its own requirement, the broad framework of the legislation aims at eliminating fiscal deficit, prudential debt management, greater transparency in fiscal operations and conducting of the fiscal policy in a medium term framework.

In a step towards fiscal prudence, all states have participated in the debt swap programme proposed by the Centre in order to bring down the overall weighted average cost of borrowings.

The three tranches already done have covered the loans with an average interest rate of over 13.5 per cent which were executed in mid 70s when liquidity was tight.

In the current fiscal, 20 per cent of the net small savings loans payable to the states from September was used to prepay past debt.

The percentage of small savings used to swap will increase to 30 per cent in 2003-04 followed by 40 per cent in 2004-05.

An RBI study has suggested that the number of states using the ways and means advances account to tide over day-to-day needs has been growing rapidly.

Gujarat, Kerala, Tamil Nadu, Maharashtra, Madhya Pradesh and West Bengal had resorted to the WMA for more than 200 days last year.

The report highlighted the fact that while the states have been failing to increase their resources, their expenditure commitments keep shooting up and this even exceed the budgeted borrowings of the states.

Responses:

• From: . (@ 109.a.001.syd.iprimus.net.au) on: Wed Oct 15 07:29:21 EDT 2003
  
  http://www.tn.gov.in/budget/archives/white6.htm
  
  6.1. The “White Paper Tamilnadu Government’s Finances“ delineates serious erosion in the fiscal stability of the State. The Government is increasingly becoming financially vulnerable on account of following factors:
  
  Ø The growth in the revenue receipts of the State Government have declined during the last five years compared to the first half of the last decade. The non-tax revenues of the Government have virtually remained stagnant during the last decade. The main reason for the declining contribution of non-tax revenues to the overall receipts of the State is the inability of the Government to collect even the bare minimum economic cost necessary for providing the services to the people.
  
  Ø The trends in the growth of revenue or current expenditure in the past few years have been alarming. These have been on account of increase in the salary, pension, loan and interest repayment liabilities of the Government and also the unsustainable subsidy-regime in the State.
  
  Ø As a result of a growing mismatch between revenue receipts and revenue expenditure, the revenue deficit has widened. The growth in Government borrowings to finance not only its capital expenditure but also a portion of its current expenditure have led to a quantum jump in the Fiscal Deficit.
  
  Ø There are limits to how much the State Government can borrow. They have to be restricted on account of growth in interest payment liabilities and also because of the restrictions being imposed by the Union Government.
  
  Ø The growth in the non-productive revenue expenditure has taken away a large share out of the total available pool of investible resources. This is evident from the declining share of development-related expenditure of the Government. During the year 2000-01, the capital expenditure including net of loans and advance was just 6 percent of the total expenditure of the Government.
  
  6.2. The growing imbalance in the finances of the State has already begun manifesting itself. The visible consequences of the deterioration in the fiscal health are as follows:
  
  Ø The Government is very often constrained to withhold clearance of bills of various agencies towards payment of services provided to the State.
  
  Ø Almost all the capital expenditure – which contributes to asset creation – is being financed through borrowings. The Government is also being forced to meet a part of its revenue expenditure through borrowings.
  
  Ø Given the increase in the quantum of committed expenditure liabilities of the Government such as on salaries, pensions, interest payments and subsidies etc. the discretion and flexibility of the Government in implementing new development programmes is being eroded.
  
  6.3. These trends are unsustainable in the long run and expose the Government to severe economic shocks. Continued erosion in the fiscal health of Tamilnadu will not only reverse all the socio-economic gains made by the State in the last five decades but also impair the ability of the Government in discharging its basic duties. A comprehensive fiscal course correction exercise is, therefore, necessary for arresting the fiscal deterioration trends and bringing the economy back on the rails.
  
  6.4. As stated earlier, the basic objective of this White Paper is to sensitise the Honourable Members of the Legislative Assembly and the people of the State on the precarious financial position of the Government. It is hoped that it will initiate an informed debate within the Government and in the midst of the public, which will enable the Government to take timely corrective steps in improving the perilous fiscal management of the State.
  
  C. PONNAIYAN,
  
  MINISTER FOR FINANCE AND LAW
  
  
• From: Siva (@ 219.65.98.164) on: Wed Oct 15 14:00:30 EDT 2003
  
  Good cut and paste service.Thx for precious and valuable info
  
  
• From: Singapore's Education Ministry Launches CD Roms to teach Tamil (@ cache162.156ce.maxonline.com.sg) on: Wed Oct 15 18:01:13 EDT 2003
  
  Singapore's Education Ministry Launches CD Roms to teach Tamil
  
  http://www.hinduonnet.com/thehindu/2002/03/01/stories/2002030102020500.htm
  
  
  Singapore Ministry of Education web site
  http://www1.moe.edu.sg/namnaadi
  
  
• From: Ramki (@ 219.65.105.34) on: Sat Oct 25 00:44:27 EDT 2003
  
  A very very timely and useful thread by Namakkal. The very fact that no one has responded in this trhead, proves that only animals are there in this forum
  
  Let me try to keep this highly useful thread alive; both aiadmk as well as dmk govts have successively ruined the finances of TamilNadu by their thoughtless fiscal policies; but now no use blaming anyone, it is time to set things right, in the interest of 60 million tamils who live in TamilNadu,India
  
  
• From: v (@ 66.36.249.149) on: Mon Nov 3 15:55:41 EST 2003
  
  100 crores spent on just a single marriage event?
  Whose money is it anyway?
  
  

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