Chandigarh, Jan 24 (PTI) Industry body Assocham todaysuggested the Punjab government to slash subsidies, stopraising huge debt to meet revenue expenditure and bring fiscalprudence in order to put the state''s finances on right track.
Assocham Secretary General DS Rawat, in a seven pointstrategy submitted to Punjab Chief Minister Parkash SinghBadal for improving fiscal situation of the state, said thatthe state''s economy could grow only at a compound rate of 5.3per cent against the country''s 8.7 per cent in last nine yearstill March 2010.
Pointing out to the poor fiscal health of the state,Rawat said it is characterised by insufficient revenues tomeet revenue expenditure, inadequate investment for basicinfrastructure sectors, stagnating social sector expenditureand pre-emption of high cost borrowed funds for financingcurrent expenditure.
Assocham asked the state to cut down on farm subsidies toencourage efficiency in use of resources.
"Reprioritisation of public expenditures towards publicinvestment vis-�-vis subsidies is needed. Subsidies mayprovide short-term benefits but encourage inefficiency in theuse of resources. Therefore, emphasis must be put on steppingup public investment in agriculture while subsidies need to beslashed," it said.
Punjab doles out subsidy on power to the tune of Rs 3,000crore.
It also asked the state to cut its unproductive subsidiesthat have debarred the private investment in the state. MOREPTI CHS
Observing that fiscal reforms of the state have not yielded desired results, he said that large and growing fiscaldeficits over the years have led to steady accumulation ofdebt from Rs 30,763 crore to Rs 67,721 crore between 2000-01and 2009-10.
"Consequently, the share of interest payment in totalexpenditure on an average stood at 17.5 per cent of totalexpenditure of the state," Assocham said.
"To add to this, the fiscal reforms adopted by the stateso far have not resulted in any significant fall in interestpayments of the state. This has contributed to theaccumulation of productive expenditures of the state," itadded.
Industry body also found that state planners have notfocused on efficiency in use of resources. "The emphasis ofthe state planners, so far, has been to increase the plan sizein every plan, with no emphasis on efficiency in resource use.
In an attempt to address multiple issues like attractinginvestment, regional allocation of resources and equity, therehas been digression of the focus of policy makers away fromfiscal management of the state," he said.
Describing the high debt cost burden as unsustainable,Assocham said: "Debt servicing cost has already been making asubstantial portion of revenues of the state unavailable forits use. Therefore, raising further debt especially formeeting the state''s revenue expenditures needs to be stopped,�it said.