Large revenue

Shillong, Mar 27: Large revenue and fiscal deficits for consecutive years have indicated continued ''macro imbalances'' in Meghalaya.

Against revenue surplus during 2003-04, the state witnessed a revenue deficit of Rs 50 crore during 2004-05, according to the Comptroller and Auditor General report published in the Assembly today.

Fiscal deficit of the state also increased by Rs 111 crore over the previous years.

Revenue of the state consists mainly of its own tax and non-tax revenue, central tax transfers and grant-in-aid from the Centre.

Overall revenue receipts increased from Rs 1,132 crore in 2000-01 to Rs 1,546 crore in 2004-05 at the trend rate of 9.7 per cent.

There were, however, significant inter-year variations in the growth rates.

During the current year, only 22 per cent of the total revenue came from state's own resources. The contribution of grants-in-aid from Government of India and Central tax transfers increased by eight per cent and 20 per cent respectively over the last year, the report said.

Total expenditure of the State increased from Rs. 1,394 crore in 2000-01 to Rs. 1,878 crore in 2004-05 at a trend rate of 8.71 per cent.

The rate of growth expenditure in 2004-05 was 16 per cent which was higher than the trend rate (8.71 per cent) for the last five years.

Expenditure of General Services and interest payments, which are considered non-developmental, together accounted for about 32 per cent of total expenditure during the same period.

The balance from current revenues of the state has continued to be negative, thereby reducing availability of funds for additional infrastructure support and other revenue generating investment.

The State witnessed a revenue deficit in 2004-05 for the second time during the five-year period 2000-2005. Its fiscal deficit also increased substantially and averaged Rs. 229 crore. Increase in the ration of fiscal liabilities to GSDP, which stood at 41 per cent during 2004-05 together with a large deficit indicates that the State may gradually be getting into a debt trap.

Similarly, the higher bouyancy of debt both with regard to its revenue receipts and own resources indicates decreasing sustainability.

Though the average interest paid by the State on its borrowings during 2000-2005 remained less than the rate of growth of its GSDP, the interest spread had declined considerably and persistence of this phenomenon may endanger debt sustainability. Availability of funds from its borrowings indicates an implicit subsidy. The ratio of the State's total financial assets to alibilities has also deteriorated indicating that a part of liabilities are without an asset back up.

The balance from current revenue (BCR) continued to be negative.

The BCR plays a critical role in determining the plan sixe and a negative BCR adversely affects the same and reduces availability of fund for additional infrastructure support and other revenue generating investment.

Thus, the state has either to generate more revenue for servicing its debt obligations. Long term fiscal stability can be achieved through measures like reduction of revenue/fiscal deficit by compressing non-developmental revenue expenditure, enhancement of additional resource mobilisation through prudent tax reforms and debt management.

UNI