Published: 16th Nov, 2023
Context:
As per the report on State finances, it has been found that States face substantial challenges in their finances, marked by high committed expenditure and a persistent revenue deficit.
Background:
- Recently, the Union Ministry of Statistics and Programme Implementation has also released figures for the Gross State Domestic Products.
- The economies of 19 states and Union Territories exceeded their pre-Covid levels, with 7 recording double-digit growth rates during 2021-22.
- The growth rates of 11 states including Gujarat and Maharashtra were not available for 2021-22.
About the Report:
- The findings are based on the 'State of State Finances' report by PRS Legislative Research.
- Objective: The report is shedding light on the complex fiscal landscape for states Post-GST and Post-pandemic.
Key Findings:
- State GST (SGST) accounts for over 40% of states’ own tax revenue but SGST to GSDP ratio continues to be lower than pre-pandemic level.
- SGST revenue is also lower than the level of guaranteed revenue for five years.
- In FY24, 11 states have budgeted a revenue deficit–gap between revenue expenditure and receipts. Of these, Andhra Pradesh, Himachal Pradesh, Kerala, Punjab, and West Bengal did so after accounting for revenue deficit grants.
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About Gross State Domestic Product (GSDP):
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- Over the past several years, states have spent around 8-9% of their revenue receipts on subsidies, with a significant portion on power subsidy.
Report Outcomes:
- Despite overall state revenue returning to pre-pandemic levels, GST collections as a percentage of Gross State Domestic Product (GSDP) remain below the pre-GST era.
- The cessation of GST compensation grants in June 2022 has adversely affected some states, highlighting the need for revenue rationalization.
Challenges Highlighted:
- States grapple with high committed expenditure and persistent revenue deficits.
- Non-merit subsidies have increased, pension reforms are being reversed, and state-owned discoms face financial strain.
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