DEC 20: The Reserve Bank of India (RBI) has warned State governments that there was a need to prioritise expenditure and its fiscal restructuring should focus on rationalisation. In a report, titled `State finances - a study of budgets (2000-01),' the central bank has said there was an alarming rise in non-development expenditure while there was continuous drop in development expenditure."The expenditure overruns stem largely from persistent rise in committed revenue expenses while at the same time there was similar rise in consumption expenditure defrayed towards staff expenses, including salaries and pensions," the report said.The overall borrowing requirements of the States reflecting the resource gap grew by nearly five times from Rs 18,787 crore in 90-91 to as high as Rs 94,739 crore (revised estimates). The state-wise data for the decade (1990-91 to 1999-00) indicated that the gross fiscal deficit (GFD) rose from 3.3 per cent to 4.9 per cent as a per cent of the GDP during the same period, reflecting growing fiscal imbalances in state finances arising from the gap between revenue receipts and expenditure obligations."The poor markmanship (degree of accuracy between estimates and actuals of budgetary data) brings to the fore issue of credibility in announcements of about fiscal corrections that governments often make," the report said.Stating that a consolidated view of state finances often skews individual states' performances, RBI said state specific programmes and strategies should be evolved to meet fiscal objectives.For special category states in the Northeast, J&K and Himachal Pradesh, there was limited room to raise resources internally and they had to depend largely on central funds to meet their expenditure commitments.The RBI has suggested that it would be useful if the States to evolve a medium term plan to cut the ratio of GFD to net state domestic product (NSDP) to attain a zero or near zero level taking into account the transfers from the Centre and disinvestment proceeds.Seeking improvement in quality of disclosures about the states financial position and health of state public sector units, RBI said "the issue of transparency has gained prominence in the context of need to mobilise resources at reasonable cost from the market."Credit ratings for the financial instruments floated by state PSUs would become more credible with timely and detailed disclosure of asset liability and financial performance, the report said.The gross state government borrowings are placed at Rs 11,250 crore during this fiscal while net market borrowings provisionally allocated is pegged at Rs 10,830 crore. At this level, the gross borrowings would be 18 per cent below the previous year's figure of Rs 13,706 crore, the RBI said.On ways and means advances, RBI said during current fiscal, up to November 30, as many as 19 states resorted to overdraft and three states could not clear their overdrafts with the apex bank, leading to suspension of their payments.During the previous fiscal, 19 States resorted to overdraft, seven of them frequently. Two states could not clear their overdrafts within the stipulated time and consequently the apex bank had to stop payments on their behalf. Due to reorganisation of States, the existing normal ways and means advance (WMA) limits for Madhya Pradesh, Uttar Pradesh and Bihar have been divided in the same ratio as the revenue sharing formula approved by the Centre for the new states of Chattisgarh, Uttaranchal and Jharkhand respectively.RBI has increased the normal WMA limits by 30 per cent for all the six states. Besides, the three-day restriction for slippage of payments in Overdraft Regulation Scheme (ORS) has been relaxed for these six states effective from October 31, 2000.The increase in normal WMA limits and relaxation in ORS would be effective up to March-end 2001.The outstanding level of WMA and overdrafts of states from RBI were placed at Rs 7,519 crore as on March 31, 2000 as compared to Rs 4,818 crore in the previous year.RBI said the immediate concern about the current level of debt was due to the recent accretion of debt at relatively high interest rates. The interest payments burden has grown from 13 per cent of revenue receipts in 1990-91 to as high as 21.2 per cent in 1999-2000 and would further rise to 22.2 per cent in current fiscal, it added.
