Tag: RBI

RBI praises Bengal’s efforts to mobilise higher revenue

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Reserve Bank of India has expressed satisfaction over West Bengal’s ability to grow own revenue.

“Revenue augmenting capacity improves in West Bengal, The state may cut down borrowing to reduce fiscal stress” RBI Deputy Governor HR Khan said Friday.

RBI Governor Raghuram Rajan said he met state finance cum industry minister Amit Mitra over a dinner and discussed the state’s financial health and the challenges it is facing.

According to state finance minister Amit Mitra, the state raised Rs 82,946 crore in the first four years of Trinamool Congress rule, out of which Rs 76,346 crore was spent towards interest and principal repayment.

Bengal’s fiscal deficit as percent of gross state domestic product was 3% for FY15 with revenue deficit at 1.3%, which were improvements compared to preceding fiscal.

 

The story was first published in The Economic Times

RBI lauds Bengal for being the first Indian State to start full e-Treasury

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West Bengal government got a pat in the back on the economic front from the Reserve Bank of India (RBI). The deputy governor of the apex bank, Harun R Khan, has lauded the state government for becoming the first state to integrate its treasuries with the core business solution (CBS) of RBI, called e-Kuber for making e-payments.

It may be noted that chief minister Mamata Banerjee had recently dubbed it as a first in India in her Facebook page. “Henceforth, all employees, pensioners, beneficiaries of government schemes, recipients of scholarships, suppliers to the government, contractors, and service providers will receive their payments directly in their bank accounts electronically from the 88 treasuries spread across the state using massive IT network.

A dedicated team of about 7,000 officers are engaged to ensure that the project runs smoothly. An SMS alert automatically goes to the recipient the moment treasury clears the bill and instructs RBI for payment,” she had said.

State finance minister Amit Mitra said once again West Bengal has taken the number one position among states in the e-governance domain. “It has already received the highest award from the Centre on e-taxation this year. West Bengal has become the first state to take the advantage of e-Kuber,” he added.

Bengal’s debt conditions improve under Trinamool

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West Bengal’s public finance and debt conditions were under adverse conditions when Mamata Banerjee took over the Government. However under the leadership of Mamata Banerjee, Chief Minister of West Bengal and Amit Mitra, Finance Minister of West Bengal along with a dedicated teams of officials the situation has improved in the last 3 years.

Note: Figures for 2012-13 are Revised Estimates and for 2013-14 are Budget Estimates. The averages used in the RBI Publication include the estimates.

In the RBI publication “State Finances-Study of Budgets 2013-14”, the ‘Debt Sustainability Indicators’ and ‘Debt Servicing Indicators’ have improved  for Bengal.  The results are here for everyone to see:

economy files

The Debt-GSDP ratio was 44% in 2008-09 and 2009-10 has decreased sharply over the years. It stands at 40.1% in 2011-12, 37.5% in 2012-13 and at 34.6% at 2013-14.

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Interest payment to GSDP ratio has fallen down from 3.8% (2005-06 to 2009-10) to 2.8% (2010-11 to 2013-14).

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Interest payment to revenue receipts has also decreased from 37.9% (2005-06 to 2009-10) to 25.8% (2010-11 to 2013-14). Revenue receipts means the taxes, duties and fees levied by the government and also includes interests on investments made by the government or dividends earned by the state.

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The growth of GSDP (g) is higher than the effective rate of interest (i), ie g-i >0. In WB, g-i, is now at 8.3(2010-11 to 2013-14) and has increased from 4.6 (2005-06 to 2009-10).  If GSDP grows at a higher rate than the effective rate of interest, then it reflects a better situation of public finance. The surplus has grown sharply over the years.

The revival of Bengal’s Public Finances

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West Bengal has gone through a significant transformation with the public finances. The state of the public finances was in a dilapidated condition when Mamata Banerjee took over as the Chief Minister of West Bengal.

Figures clearly show that the State’s fiscal measures have borne fruit:

  • Revenue Deficit (difference between budgeted net revenue and actual net revenue) which was 3.6% (2010-11) has declined over the years. It was 2.7% (2011-12) to 2.1% (2012-13) and is projected at 0.5% (2013-14). The Revenue Deficit has sharply fallen from Rs 21,578 crore (2009-10) to Rs 13,308 crore (2012-13) and to Rs 3,488 crore (2013-14).
  •  Gross Fiscal Deficit (difference between government’s expenditure and revenue expressed as a percentage of GDP/GSDP) which was 4.4% (2010-11) has also declined over the years. It was 3.3 % (2011-12) and in 2013-14, it is projected at 1.8%. In the non special category states, in terms of Gross Fiscal Deficit, West Bengal had second highest GFD (2011-12), while in 2013-14, 6 states are above WB.
  • The state’s own tax collection has increased historically. It was at Rs 22,000 crore (2011-12) and increased by more than 40% in 2012-13 and to Rs 39,100 crore (2013-14).
  • Capital Expenditure Disbursement (it is the expenditure on development of machinery, equipment, building and other infrastructure) a greater growth of infrastructure like roads, bridges etc) grew by 44% in 2012-13, from Rs 10,505 crore (2011-12) to Rs 15,137 crore (2012-13) and further to Rs 18,914 crore (2013-14).
  • The ‘Development Expenditure’ (as defined by RBI) has increased from 52% (2011-12) to 57% (2012-13 and 2013-14).
  • The ratio of own revenue generation to the revenue expenditure has significantly increased from 35.8% (2011-12) to 39.8% (2012-13) and to 45.2% (2013-14).

 

Note: The figures of 2010-11 and 2011-12 are actual figures while figures of 2012-13 are Revised Estimates and 2013-14 are Budget Estimates.

Source of data: RBI publications and State Budgets.