Assam's Rising Debt and Fiscal Deficit Highlighted in CAG Report: Increasing Fiscal Stress Predicted

GUWAHATI: As per the debt sustainability analysis, the public debt of the Government of Assam has grown on an average at a rate of 27.18 percent annually of the outstanding public debt between 2018-19 and 2022-23. The public debt-GSDP (Gross State Domestic Product) ratio of Assam has increased from 13.84 percent in 2018-19 to 20.48 percent in 2022-23, which indicates that debt stabilisation may not be possible in the near future.

This has been revealed in the State Finances Audit Report of the Comptroller and Auditor General (CAG) on India for the year ended on March 31, 2023. The report was placed in the Assam Legislative Assembly on Friday.

According to the CAG report, the FRBM (Fiscal Responsibility and Budget Management) Act/Rules prescribes certain limits within which the revenue deficit, fiscal deficit, and debt as a percentage of the GSDP should be, and similarly for guarantees as a percentage of revenue receipts of the previous year.

In 2022-23, the revenue deficit was 2.45 percent as against the target of revenue surplus; the fiscal deficit was 6.12 percent as against the limit of 3.5 percent; debt was 24.98 percent as against the limit of 32 percent; and guarantees given were 5.82 percent as against the prescribed limit of 50 percent of the state’s tax and non-tax revenue of the second preceding year. Going by the fiscal trends, the state finances would be under stress in the medium to long run.

According to the CAG report, the Gross State Domestic Product (GSDP) (at current prices) grew at an average growth rate of 11.89 percent from Rs 3,09,336.32 crore in 2018-19 to Rs 4,93,166.60 crore in 2022-23. Budget outlay of the state grew at an average growth rate of 8.86 percent from Rs 21,08,490.35 crore in 2018-19 to Rs 1,56,525.63 crore in 2022-23.

There was 19.52 percent growth in GSDP over 2021–22. The revenue receipts grew at 12.44 percent during the year; however, the percentage of revenue receipts over GSDP decreased from 19.34 percent in 2021-22 to 18.20 percent in 2022-23. The tax revenue increased by 13.66 percent during the period, and the state’s own tax revenue increased by 25.44 percent. The total expenditure (revenue expenditure, capital expenditure, loans and advances, and appropriation to the contingency fund) of the state increased from Rs 1,02,777.80 crore in 2021-22 to Rs 1,19,952.20 crore in 2022-23, increasing by 16.71 percent. Of this, revenue expenditure showed a 23.34 percent increase over 2021–22. Revenue deficit increased from Rs 22,732.77 crore to Rs 12,072.35 crore, registering a 341.76 percent increase over 2021–22, while fiscal deficit increased from Rs 19,863.12 crore in 2021–22 to Rs 30,204.83 crore in 2022–23, registering an increase of 52.06 percent.

The continuous mismatch between receipts and expenditures indicates rising fiscal stress, the report said.

Under the revenue expenditure, the quantum of committed expenditure constitutes the largest share. Committed expenditure has the first charge on the resources and consists of expenditure on salaries and wages, pensions, and interest payments. Committed expenditure on salaries and wages, pensions, and interest payments constituted 54 to 68 percent of revenue expenditure during 2018-19 and 2022-23.

According to the CAG report, as of March 31, 2023, the State Government, through Public Sector Undertakings (PSUs) and parastatals, raised Rs 1,091.24 crore as off-budget borrowings, which did not flow into the Consolidated Fund of the State but are required to be repaid and serviced through budget. Out of which, Rs 852.61 crore was raised during 2022–23. During the year, the state government paid an interest of Rs 34.71 crore towards off-budget borrowing.

According to the report, the government had guaranteed loans raised by various corporations and others, which, at the end of 2022–23, stood at Rs 1,166.49 crore. It was 5.82 percent of the state’s own tax and non-tax revenue of the second preceding year (Rs 20,033.22 crore), i.e., well within the limit prescribed in the State FRBM Act (50 percent of the state’s tax and non-tax revenue of the second preceding year).

According to the CAG report, so far as revenue and expenditure mismatch is concerned, one of the important constraints is committed and inflexible expenditure, which includes salaries and wages, pension payments, interests, etc., and also other inflexible expenditure such as those arising out of commitment for centrally sponsored schemes, transfers to reserve funds, transfers to local bodies, etc.

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