03-23-2007, 11:07 PM
Some informative article on the West Bengal economic situation.
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www.blonnet.com/2004/05/18/stories/2004051800011100.htm
West Bengal economy: A not-so-rosy picture
H. K. Bhattacharyya
WITH the Left parties being the major ally of the new Congress-led government
at the Centre, it is but natural that they will have a major say in economic
policy-making. To gauge the likely fallout of their influence, it may be
relevant to see how the bastion of the Left, West Bengal, has been faring on
the economic front.
West Bengal has joined the bandwagon of `poor States' ? Uttaranchal, Uttar
Pradesh, Bihar, Jharkhand, Chhatisgarh, Madhya Pradesh, Orissa, Assam and
Tripura. The BIMARU States, which included Bihar, Madhya Pradesh, Rajasthan
and Uttar Pradesh, now stands modified to BINABU ? with West Bengal replacing
Rajasthan.
And among the metros, Kolkata, the pride of the Bengalis, is just about
holding out.
Based on 18 indicators, such as income, consumption awareness and market
infrastructure, Kolkata ranks third among the major 10 cities ? behind Mumbai
at the top and Delhi.
On the agriculture front, West Bengal has something to smile about. It is No.
1 in rice production, contributing 14.6 per cent of the country's total
production, No. 2 in potato cultivation (34.4 per cent of the total) and No. 1
in jute and mesta, contributing 71.6 per cent of the total output.
But in terms of per capita foodgrains production (2000-01), it ranks eighth
and in per capita gross industrial output and value added in industries, 12th.
The Budget for 2004-05 estimates tax and non-tax revenues to grow at 18.4 per
cent and 30.4 per cent respectively, generating Rs 1,904 crore.
Though the Budget presents a rosy picture, the reality is not so. The finances
are in a shambles.
The revised estimates of Budget 2003-04 show that wages, pension and interest
payments constitute 101 per cent of the revenue receipts and, of this,
interest liability alone make up 43.3 per cent ? the highest among 15 States.
In 2003-04, sales tax revenues fell by Rs 36 crore, land revenues by Rs 15
crore, excise Rs 9 crore, revenue from taxes on goods and passengers Rs 4.2
crore and other taxes Rs 28 crore.
However, the revenue from electricity duty rose substantially, by Rs 210
crore. Stamp duty and motor vehicle tax collections also went up, by Rs 14
crore and Rs 40 crore respectively.
In the current year, the estimated annual interest liability is expected to be
Rs 13,604 crore and the wage bill for government employees, Rs 12,000 crore;
these work out to 35.3 per cent and 3.1 per cent, respectively, of the State's
total Budget.
There is hardly any possibility of introducing entry tax, value-added tax and
tax on services, but the Government seems optimistic about furthering growth
and productivity and generating five-lakh extra jobs through diversification
of agriculture; pisciculture, for instance, is expected to create 70,000 jobs.
Cutting subsidies to the State's electricity board and the transport sector,
lowering non-Plan expenditure, reducing interest payments gradually,
containing the growth in salaries and pensions within 5 per cent and 10 per
cent respectively and steadily increasing the State Domestic Product (touching
7.6 per cent) would go a long way in addressing the financial crisis.
Revenue receipts make up more than two-thirds of the total revenue of the
State. The other channels of revenue include borrowings from the Centre, the
market and the contingency fund and through small savings and remittances.
As the finances are in disarray, the State may find it difficult to focus on
developmental work.
In 2002-03, the State Government did not spend Rs 3 crore of `grant
allocation' meant for various highway projects; a benefit that would have
accrued to the residents.
In a study of 19 States based on 46 parameters, including infrastructure,
education, health, investment, consumer market, and law and order, across
eight categories, West Bengal was ranked 14 during the period 1991-2001, with
Goa placed first and Bihar, the last.
Though the State has an impressive record in land reforms and
decentralisation, its economy has slid perceptibly over the years; about 75
per cent of the registered SSIs in the State are sick. The private sector is
wary about investing and the gross fiscal deficit as a percentage of State
Gross Domestic Product was a whopping 8.5 per cent in 1999-2000, the highest
among the States.
Bringing the economy on a par with the advanced States would be difficult
unless, of course, the people of Bengal decide to take up the challenge. And
this would entail a change in mindset.
(The author is a New Delhi-based project management consultant.)
******************************************************************************
openlib.org/home/ila/MEDIA/2006/kerela_bengal.html
Kerala moves towards fiscal irresponsibility. West Bengal tries to put its house in order
Indian Express, July 10, 2006
The new LDF government in Kerela presented Budget 2006-07 for the state with a sharp rise in spending. Revenue expenditure is budgeted to increase from an average of 16.9 percent of Gross State Domestic Product over the last ten years to 19.5 percent in the current year. This will result in a sharp increase in the revenue deficit for the state at Rs 5,415 crore. In 2005-06 the revenue deficit was Rs 3,561 crores. Having gone for a sharp increase in expenditure on welfare and benefits, the Left front Finance Minister Dr Thomas Issac criticized the centre for restricting deficits. The fiscal deficit in Kerala in 2006-7 stands at Rs 7,534 crore, having gone up from Rs 4,513 crores in the previous year.
The minister said, "It is when we ask how a democratically elected Government can show such an obvious anti-people attitude, that the role of 'Fiscal Responsibility Legislation' imposed by the Central Government as part of globalization becomes very clear. Their commitment is not towards people who elected them but to certain targets fixed by experts who framed the fiscal responsibility laws, which are then enacted by some State Governments, knowingly or unknowingly. This is truly anti-democratic."
Refering to the state fiscal responsibility legislation accepted by the previous state government in line with the framework created by the finance commission, Dr Issac said,
"The Centre has been thrusting targets related to income, expenditure, Revenue Deficit and Fiscal Deficit on states in such a way that it would be applicable even to future Governments. The Finance Commissions have been made a tool for this. Governments, which come to power giving a lot of promises, are forced to swallow them quoting these conditions."
The West Bengal budget presented by Finance Minister Asim Das Gupta after the CPM government was re-elected to power shows an estimate of a revenue deficit of Rs 8,759 crore. The state has not been in a position to sign up for the Fiscal Responsibility Legislation due to the precarious fiscal position of the state. The CPM government headed by Buddadeb Dasgupta appears to be making some progress on getting the state out of the financial mess it is in. This is not an easy task. The fical performance of West Bengal in the nineties was amongst the worst in Indian states. Twelfth Finanace Commission estimates show that West Bengal ranked the worst among all states in terms of its revenue deficit in the years 2000-03 when its revenue deficit stood at 5.47 percent of Gross State Domestic Product. The Commission report also shows that the revenue deficit in West Bengal worsened sharply from 1993-96 to 2000-03. Only next to Gujarat where the slippage was the highest, it worsened by 3.95 percent of GSDP.
The fiscal deficit in West Bengal was the second worst after Orissa. Between 2000-03 the fiscal deficit in West Bengal stood at 7.31 percent of GSDP. The slippage in fiscal deficit over the period 1993-96 to 2000-03 was the worst among all states. It fell by 4.13 percent of GSDP.
West Bengal has also been the worst performer in terms of own tax revenue collection. It collected 4.26 percent of GSDP as taxes. Even Bihar collected more of its prodcuction as taxes (at 4.46 percent of GDP) than West Bengal. Instead of improving, as most states did on this front, West Bengal saw a decline in own tax revenue over the period 1993-96 to 2000-03 by 1.2 percent of GSDP.
To tackle the financial crises in the state the West Bengal government under Buddhadeb Dasgupta has been taking measures to raise own revenues.
Dasgupta, the West Bengal Finance Minister noted in his budget speech that "the ratio of revenue deficit to revenue receipt which was 90.9 per cent in 1999-2000 has noticeably fallen to an estimated 34.87 per cent in the year 2005-2006. At the same time, the ratio of fiscal deficit to State Domestic Product which increased to 9.20 per cent in 19992000 has sharply come down to an estimated 4.67 per cent in
2005-06."
The state VAT which has been spearheaded by the West Bengal Finance minister is one of the instruments through which the state government hopes to improve the financial position of the state.
****************************************************************************
www.financialexpress.com/fe_full_story.php?content_id=158129
FE CENTRES
Asim sets 9% SDP growth target, says jobs mean more than stats
ECONOMY BUREAU
Posted online: Saturday, March 17, 2007 at 0151 hours IST
KOLKATA, MAR16: West Bengal finance minister Asim Dasgupta on Friday set a growth target of 9% for state domestic product (SDP) in 2007-08, against an average of 8.2% over the past three years and an expected 8.7% in the current year in his budget for 2007-08.
He proposes to raise additional revenues of Rs 150 crore, leaving a final deficit of Rs 3 crore.
Though his growth projection is less than the average 11th plan (2007-08 to 2011-12) Union finance minister P Chidambaram's gross domestic product (GDP) growth target of 10%, Dasgupta reckons that his "alternative approach" of economic development of employment generation has nothing to do with mere growth statistics.
"For an unemployed youth, GDP does not mean anything unless there is a job,"
Dasgupta said during the press conference after the budget presentation.
According to Chidambaram, the average growth rate in the three years of the UPA government was 8.6% compared with the state's average annual growth rate of 8.2% over the last three years.
Even if the state's estimated growth rate is less than the centre's target, Dasgupta has managed to contain the government's spending spree when it comes to pensions, subsidy and salary expenditure.
The revised numbers for 2006-7 were less than the initial estimates, thus meeting the budget targets.
The state's estimated total salary expenditure in 2006-07 was Rs 11,699 crore but in the revised estimate it was Rs 11,430 crore. The total salary for the 2007-08 will be Rs 12,079 crore, an increase of 5.67%.
Similar is the case with pension and other retirement benefits and subsidy. The initial estimates for pension and subsidy for 2006-07 were Rs 3,622 crore and Rs 395 crore respectively but the final numbers were Rs 3,441 and Rs 377 crore.
The state government will spend Rs 3,699 crore for pension and retirement benefits and Rs 372 crore for subsidy.
In interest payment, the state government has been able to meet its goal in 2006-07 under the heads "payment to central government and "payment to other institutions for PF and other deposits."
As a result of containing payment on salary, pension and interest payment under leash, the total payment under these heads as a percentage of revenue receipts has fallen from 152.7 % in 1999-2000 to 95.2% in 2006-07.
Dasgupta pointed out that, as a result of all these, he has managed to increase the state's plan expenditure over the years from Rs 2,529 crore in 2003-04 to Rs 7,978 crore in 2006-07.
In terms of the outstanding debt, West Bengal (Rs 1,25,407 crore, 2006-07 BE) ranks third after Maharashtra (Rs 1,36,063 crore) and Uttar Pradesh (Rs 1,49,260 crore).
In terms of total outstanding liabilities as a percentage of SDP, West Bengal's rank is fairly high in the national scale, at 46.8% against the national average of 33.1%.
The debt will go up in 2007-08 from the revised Rs 1,21,753 crore in 2006-07 to Rs 1,33,384 crore in 2007-08.
But, Dasgupta said, if the present relative trend of growth of state's own revenue and non-plan revenue expenditure is maintained, at the end of 11th plan the percentage will fall to 39.5%.
Dasgupta expects fiscal deficit as a percentage of SDP to come down to 3.9% in 2007-08 from 4.5% in 2006-07. Revenue deficit as a percentage of revenue receipts was 31.1% in 2006-07 and the target is to lower it to 23.4%.
***************************************************************************
www.blonnet.com/2004/05/18/stories/2004051800011100.htm
West Bengal economy: A not-so-rosy picture
H. K. Bhattacharyya
WITH the Left parties being the major ally of the new Congress-led government
at the Centre, it is but natural that they will have a major say in economic
policy-making. To gauge the likely fallout of their influence, it may be
relevant to see how the bastion of the Left, West Bengal, has been faring on
the economic front.
West Bengal has joined the bandwagon of `poor States' ? Uttaranchal, Uttar
Pradesh, Bihar, Jharkhand, Chhatisgarh, Madhya Pradesh, Orissa, Assam and
Tripura. The BIMARU States, which included Bihar, Madhya Pradesh, Rajasthan
and Uttar Pradesh, now stands modified to BINABU ? with West Bengal replacing
Rajasthan.
And among the metros, Kolkata, the pride of the Bengalis, is just about
holding out.
Based on 18 indicators, such as income, consumption awareness and market
infrastructure, Kolkata ranks third among the major 10 cities ? behind Mumbai
at the top and Delhi.
On the agriculture front, West Bengal has something to smile about. It is No.
1 in rice production, contributing 14.6 per cent of the country's total
production, No. 2 in potato cultivation (34.4 per cent of the total) and No. 1
in jute and mesta, contributing 71.6 per cent of the total output.
But in terms of per capita foodgrains production (2000-01), it ranks eighth
and in per capita gross industrial output and value added in industries, 12th.
The Budget for 2004-05 estimates tax and non-tax revenues to grow at 18.4 per
cent and 30.4 per cent respectively, generating Rs 1,904 crore.
Though the Budget presents a rosy picture, the reality is not so. The finances
are in a shambles.
The revised estimates of Budget 2003-04 show that wages, pension and interest
payments constitute 101 per cent of the revenue receipts and, of this,
interest liability alone make up 43.3 per cent ? the highest among 15 States.
In 2003-04, sales tax revenues fell by Rs 36 crore, land revenues by Rs 15
crore, excise Rs 9 crore, revenue from taxes on goods and passengers Rs 4.2
crore and other taxes Rs 28 crore.
However, the revenue from electricity duty rose substantially, by Rs 210
crore. Stamp duty and motor vehicle tax collections also went up, by Rs 14
crore and Rs 40 crore respectively.
In the current year, the estimated annual interest liability is expected to be
Rs 13,604 crore and the wage bill for government employees, Rs 12,000 crore;
these work out to 35.3 per cent and 3.1 per cent, respectively, of the State's
total Budget.
There is hardly any possibility of introducing entry tax, value-added tax and
tax on services, but the Government seems optimistic about furthering growth
and productivity and generating five-lakh extra jobs through diversification
of agriculture; pisciculture, for instance, is expected to create 70,000 jobs.
Cutting subsidies to the State's electricity board and the transport sector,
lowering non-Plan expenditure, reducing interest payments gradually,
containing the growth in salaries and pensions within 5 per cent and 10 per
cent respectively and steadily increasing the State Domestic Product (touching
7.6 per cent) would go a long way in addressing the financial crisis.
Revenue receipts make up more than two-thirds of the total revenue of the
State. The other channels of revenue include borrowings from the Centre, the
market and the contingency fund and through small savings and remittances.
As the finances are in disarray, the State may find it difficult to focus on
developmental work.
In 2002-03, the State Government did not spend Rs 3 crore of `grant
allocation' meant for various highway projects; a benefit that would have
accrued to the residents.
In a study of 19 States based on 46 parameters, including infrastructure,
education, health, investment, consumer market, and law and order, across
eight categories, West Bengal was ranked 14 during the period 1991-2001, with
Goa placed first and Bihar, the last.
Though the State has an impressive record in land reforms and
decentralisation, its economy has slid perceptibly over the years; about 75
per cent of the registered SSIs in the State are sick. The private sector is
wary about investing and the gross fiscal deficit as a percentage of State
Gross Domestic Product was a whopping 8.5 per cent in 1999-2000, the highest
among the States.
Bringing the economy on a par with the advanced States would be difficult
unless, of course, the people of Bengal decide to take up the challenge. And
this would entail a change in mindset.
(The author is a New Delhi-based project management consultant.)
******************************************************************************
openlib.org/home/ila/MEDIA/2006/kerela_bengal.html
Kerala moves towards fiscal irresponsibility. West Bengal tries to put its house in order
Indian Express, July 10, 2006
The new LDF government in Kerela presented Budget 2006-07 for the state with a sharp rise in spending. Revenue expenditure is budgeted to increase from an average of 16.9 percent of Gross State Domestic Product over the last ten years to 19.5 percent in the current year. This will result in a sharp increase in the revenue deficit for the state at Rs 5,415 crore. In 2005-06 the revenue deficit was Rs 3,561 crores. Having gone for a sharp increase in expenditure on welfare and benefits, the Left front Finance Minister Dr Thomas Issac criticized the centre for restricting deficits. The fiscal deficit in Kerala in 2006-7 stands at Rs 7,534 crore, having gone up from Rs 4,513 crores in the previous year.
The minister said, "It is when we ask how a democratically elected Government can show such an obvious anti-people attitude, that the role of 'Fiscal Responsibility Legislation' imposed by the Central Government as part of globalization becomes very clear. Their commitment is not towards people who elected them but to certain targets fixed by experts who framed the fiscal responsibility laws, which are then enacted by some State Governments, knowingly or unknowingly. This is truly anti-democratic."
Refering to the state fiscal responsibility legislation accepted by the previous state government in line with the framework created by the finance commission, Dr Issac said,
"The Centre has been thrusting targets related to income, expenditure, Revenue Deficit and Fiscal Deficit on states in such a way that it would be applicable even to future Governments. The Finance Commissions have been made a tool for this. Governments, which come to power giving a lot of promises, are forced to swallow them quoting these conditions."
The West Bengal budget presented by Finance Minister Asim Das Gupta after the CPM government was re-elected to power shows an estimate of a revenue deficit of Rs 8,759 crore. The state has not been in a position to sign up for the Fiscal Responsibility Legislation due to the precarious fiscal position of the state. The CPM government headed by Buddadeb Dasgupta appears to be making some progress on getting the state out of the financial mess it is in. This is not an easy task. The fical performance of West Bengal in the nineties was amongst the worst in Indian states. Twelfth Finanace Commission estimates show that West Bengal ranked the worst among all states in terms of its revenue deficit in the years 2000-03 when its revenue deficit stood at 5.47 percent of Gross State Domestic Product. The Commission report also shows that the revenue deficit in West Bengal worsened sharply from 1993-96 to 2000-03. Only next to Gujarat where the slippage was the highest, it worsened by 3.95 percent of GSDP.
The fiscal deficit in West Bengal was the second worst after Orissa. Between 2000-03 the fiscal deficit in West Bengal stood at 7.31 percent of GSDP. The slippage in fiscal deficit over the period 1993-96 to 2000-03 was the worst among all states. It fell by 4.13 percent of GSDP.
West Bengal has also been the worst performer in terms of own tax revenue collection. It collected 4.26 percent of GSDP as taxes. Even Bihar collected more of its prodcuction as taxes (at 4.46 percent of GDP) than West Bengal. Instead of improving, as most states did on this front, West Bengal saw a decline in own tax revenue over the period 1993-96 to 2000-03 by 1.2 percent of GSDP.
To tackle the financial crises in the state the West Bengal government under Buddhadeb Dasgupta has been taking measures to raise own revenues.
Dasgupta, the West Bengal Finance Minister noted in his budget speech that "the ratio of revenue deficit to revenue receipt which was 90.9 per cent in 1999-2000 has noticeably fallen to an estimated 34.87 per cent in the year 2005-2006. At the same time, the ratio of fiscal deficit to State Domestic Product which increased to 9.20 per cent in 19992000 has sharply come down to an estimated 4.67 per cent in
2005-06."
The state VAT which has been spearheaded by the West Bengal Finance minister is one of the instruments through which the state government hopes to improve the financial position of the state.
****************************************************************************
www.financialexpress.com/fe_full_story.php?content_id=158129
FE CENTRES
Asim sets 9% SDP growth target, says jobs mean more than stats
ECONOMY BUREAU
Posted online: Saturday, March 17, 2007 at 0151 hours IST
KOLKATA, MAR16: West Bengal finance minister Asim Dasgupta on Friday set a growth target of 9% for state domestic product (SDP) in 2007-08, against an average of 8.2% over the past three years and an expected 8.7% in the current year in his budget for 2007-08.
He proposes to raise additional revenues of Rs 150 crore, leaving a final deficit of Rs 3 crore.
Though his growth projection is less than the average 11th plan (2007-08 to 2011-12) Union finance minister P Chidambaram's gross domestic product (GDP) growth target of 10%, Dasgupta reckons that his "alternative approach" of economic development of employment generation has nothing to do with mere growth statistics.
"For an unemployed youth, GDP does not mean anything unless there is a job,"
Dasgupta said during the press conference after the budget presentation.
According to Chidambaram, the average growth rate in the three years of the UPA government was 8.6% compared with the state's average annual growth rate of 8.2% over the last three years.
Even if the state's estimated growth rate is less than the centre's target, Dasgupta has managed to contain the government's spending spree when it comes to pensions, subsidy and salary expenditure.
The revised numbers for 2006-7 were less than the initial estimates, thus meeting the budget targets.
The state's estimated total salary expenditure in 2006-07 was Rs 11,699 crore but in the revised estimate it was Rs 11,430 crore. The total salary for the 2007-08 will be Rs 12,079 crore, an increase of 5.67%.
Similar is the case with pension and other retirement benefits and subsidy. The initial estimates for pension and subsidy for 2006-07 were Rs 3,622 crore and Rs 395 crore respectively but the final numbers were Rs 3,441 and Rs 377 crore.
The state government will spend Rs 3,699 crore for pension and retirement benefits and Rs 372 crore for subsidy.
In interest payment, the state government has been able to meet its goal in 2006-07 under the heads "payment to central government and "payment to other institutions for PF and other deposits."
As a result of containing payment on salary, pension and interest payment under leash, the total payment under these heads as a percentage of revenue receipts has fallen from 152.7 % in 1999-2000 to 95.2% in 2006-07.
Dasgupta pointed out that, as a result of all these, he has managed to increase the state's plan expenditure over the years from Rs 2,529 crore in 2003-04 to Rs 7,978 crore in 2006-07.
In terms of the outstanding debt, West Bengal (Rs 1,25,407 crore, 2006-07 BE) ranks third after Maharashtra (Rs 1,36,063 crore) and Uttar Pradesh (Rs 1,49,260 crore).
In terms of total outstanding liabilities as a percentage of SDP, West Bengal's rank is fairly high in the national scale, at 46.8% against the national average of 33.1%.
The debt will go up in 2007-08 from the revised Rs 1,21,753 crore in 2006-07 to Rs 1,33,384 crore in 2007-08.
But, Dasgupta said, if the present relative trend of growth of state's own revenue and non-plan revenue expenditure is maintained, at the end of 11th plan the percentage will fall to 39.5%.
Dasgupta expects fiscal deficit as a percentage of SDP to come down to 3.9% in 2007-08 from 4.5% in 2006-07. Revenue deficit as a percentage of revenue receipts was 31.1% in 2006-07 and the target is to lower it to 23.4%.