Haryana, a major manufacturing and service hub of northern India, has a mixed economic record over the last five years. While economic growth in the state has steadily declined after an initial boost during the first year of the present government, the state’s fiscal performance has improved over the years. The proportion of asset creating capital expenditure fell after a sharp surge in its first year, but rose over the last three years. Haryana, which is heading for polls, is home to some of the leading information technology, automobile, real estate and manufacturing companies in India spread across Gurgaon, Manesar belt in the NCR. While capital expenditure picked up in the last three years — in contrast with the trend in many other states, which cut down on asset creating spending to meet to fiscal deficit targets — Haryana’s proportion was still below the peak of 32 per cent reached in 2015-16 during the tenure of the present government. Capital expenditure, or capex, of the state increased 16.8 per cent to Rs 35,041 crore, as per Revised Estimates 2018-19, up from Rs 21,272 crore of actual capital expenditure in 2017-18. Despite increase in capital expenditure, the proportion of spending on key social sectors of education, health among others were below the national average. In 2019-20, Haryana has allocated 13.9 per cent of its expenditure on education — lower than the average 15.9 per cent expenditure allocated to education by other states (as per 2018-19 Budget Estimates latest available). On the health front, Haryana has allocated 4.5 per cent of its expenditure, lower than the average 5.2 per cent of national average. Spending on agriculture and allied activities stood at 4.1 per cent in the state, as against the national average of 6.4 per cent. Haryana spent 4.9 per cent of its total expenditure on rural development in 2019-20, compared to the national average of 6.1 per cent. From a high of 6.48 per cent in 2015-16, Haryana brought its fiscal deficit down to 3.05 per cent in 2017-18 and 2.90 per cent in 2018-19. For 2019-20, the state’s fiscal deficit is pegged at 2.86 per cent as per BE — within the 3 per cent threshold as per the Fiscal Responsibility and Budget Management (FRBM) laws. Growth rate above national average and rising revenues helped the state pare its deficit. Development spending by states is important over economic growth at national level. The latest study by the Reserve Bank of India on state finances revealed that the states’ gross fiscal deficit was within the threshold of FRBM in the last two years, but it was possible due to sharp reduction in capital expenditure by states. The report said sharp reduction in capex by states has potentially adverse implications for the pace and quality of economic development, given that the states spend around one and a half times more than the Centre. In the case of Haryana, even as expenditure on key social sector heads is below national average, overall capex witnessed double digit growth along with steady improvement in the state’s fiscal deficit numbers. The state’s per capita income in the state grew at 35 per cent at constant prices in five years from 2014-15 (Rs 1,25,032) to 2018-19 (Rs 1,68,209).
