MUMBAI: Rajasthan and Uttar Pradesh remain the states with the highest fiscal deficits last year, even as their budget estimates target reductions by 36 per cent and 22 per cent, respectively, in fiscal year 2017, the central bank’s statistics handbook on Indian provinces said.
According to data released on Saturday, Rajasthan had the highest gross fiscal deficit. Revised estimates in the year ended March 2016 were at Rs 67,350 crore, up more than three times from Rs 19,000 crore in March 2015. The jump vaulted it past UP as the state with the highest absolute deficit, data show. UP, is not far behind, with Rs 64,320 crore absolute deficit in the fiscal ended March 2016, up from Rs 32,510 crore in the year ended March 2015. However , both states aimed to reduce deficits in the fiscal ended March 2017: UP had targeted to rein in deficits to Rs 49,960 crore, and Rajasthan to Rs 43,150 crore.
“Initial trends show that states are attempting to lower borrowings, which will bring down their deficit. Even in the current financial year, state borrowing is coming down. It remains to be seen whether it is due to better collection of taxes post-demonetisation. But the recent spate of farm loan waivers could make a big dent in state finances. Not to forget the impact of the Seventh Pay Commission and GST, which could hit state revenue in the short term,” a private bank economist said.
SPATE OF LOAN WAIVERS
Maharashtra became the latest state to announce a loan waiver after CM Devendra Fadnavis announced a Rs 34,000 crore scheme on Saturday. The programme would allow the write-off of debt up to Rs 1.5 lakh per farmer. The recent waivers started after UP announced a Rs 36,359-crore plan in April, and it was followed by simi lar announcements by Punjab and Karnataka. States like UP , which are debt-laden, will find it difficult to find the resources to make up for the waivers.
RBI’s statistics show that credit by commercial banks started to slow in fiscal 2015. State-wide credit growth fell to 9.49 per cent in fiscal 2015 from 14 per cent in fiscal 2014, the slowest in at least eight years. The slowdown continues, with growth in bank credit falling to 5.1 per cent in fiscal year 2017, the slowest in over 60 years, because lending from state-owned banks has come to a standstill.
Industrial credit, which has also slowed sharply, was already showing signs of a fall.