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CAG warns Gujarat of ‘falling into debt trap’

In other words, the CAG pointed out that Gujarat will have to repay Rs 1.87 lakh crore of the total Rs 3.08 lakh crore of public debt, by 2028.

Written by Avinash Nair | Ahmedabad |
April 1, 2022 12:57:44 am
Gujarat Legislative AssemblyGujarat Legislative Assembly (file photo)

Gujarat will have to repay 61 per cent of its total Rs 3.08 lakh crore of public debt in next seven years, stated the Comptroller and Auditor General of India (CAG) in its latest report tabled in the Gujarat Assembly on Thursday that warned the state of “falling into a debt trap”.

“Debt maturity and repayment profile indicate commitment on the part of government for debt repayment or debt servicing. The maturity profile of outstanding stock of public debt as on March 31, 2021 indicates that 61 per cent of the total public debt would be repayable within the next seven years which may put a strain on government budget during that period,” stated the audit watch dog in its report titled “State Finances Audit Report” for the year till March 31, 2021.

In other words, the CAG pointed out that Gujarat will have to repay Rs 1.87 lakh crore of the total Rs 3.08 lakh crore of public debt, by 2028. “In view of the increasing committed expenditure on one hand and revenue deficit on the other, the state government would have to work out a well-thought-out borrowing-repayment strategy to avoid falling into a debt trap,” it stated.

The CAG stated that while Gujarat’s Gross State Domestic Product (GSDP) grew at a Compounded Annual Growth Rate or CAGR of 9.19 per cent between 2016-21, the outstanding public debt has grown at a CAGR of 11.49 per cent. “The above indicators show there is a need to review sustainability of debt of the state,” the auditor stated. In March, The Indian Express reported that the public debt of Gujarat is estimated to be Rs 3.2 lakh crore at end of March 31, 2022 and is projected to cross Rs 4.5 lakh crore by 2024-’25.

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Without mentioning the Covid pandemic that adversely affected the finances of the state government in 2020-’21, the CAG stated, “The
state achieved ‘zero’ revenue deficit targets in 2011-’12 and reported a revenue surplus thereafter till 2019-’20. The state turned revenue deficit for the first time in 2020-’21, with deficit of Rs 22,548 crore, against the target of revenue surplus of Rs 789 crore proposed in Medium-term Fiscal Policy Statement.”

“Since Gujarat turned revenue defict for first time since 2011-’12, this year borrowerd funds were used for revenue expenditure, as well as capital expenditure and repayment of debt,” it added.

CAG also pointed out that during 2020-’21, Gujarat understated its revenue deficit by Rs 10,997.93 crore. It said that the state government misclassified revenue expenditure as capital and off budget operations.

“The state’s actual revenue deficit would stand at Rs 33,525 crore during 2020-’21, if the items of shortfall in state government contribution to consolidated sinking fund, non-discharge of interest liabilities and incorrect classification are factored in,” the CAG said.

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