Gujarat's Budget Allocations Outpaced By Spiralling Public Debt !

 

BY R.K. MISRA

“Blessed are the young for they shall inherit the national debt “,said  Herbert Hoover, the 31^st President of the United States who faced the brunt of the 1929 stock market crash and the Great Depression. The context of his message remains out of reach but the parable of mounting public debt nearer home sure arouses concern.

Gujarat’s budget proposals for the financial year 2023-24  have brought home with stunning accuracy that its allocations stand outpaced by its spiraling public debt.

On February 24,the Bhupendra Patel- led BJP government in Gujarat  presented its first budget after being re-elected with a record breaking steam roller margin. Finance Minister Kanu Desai presented a Rs 3.01 lakh crore budget  proposals for the financial year 2023-24. This figure   stood outstripped by Rs 80,000 crores with its public debt projection  slated to stand at Rs 3.81 lakh crores over  the same period .

According to J.P. Gupta, principal secretary, finance the state intends to borrow between Rs 30,000 crores to Rs 35,000 crores during this  period taking the public debt to Rs 3.81 lakh crores.  “The public debt stood at 15.02 per cent of Gross State Domestic Product(GSDP) for 2023-24 which is an improvement from 15.75 per cent in 2022-23’,he added. The public debt in 2022-23 stood at Rs 3.39 lakh crore and it is projected to rise to Rs 4.8 lakh crore by 2025-26.

Though the fiscal deficit of Gujarat remained below the  prescribed  three per cent of GSDP, the projected deficit for the 2023-24 stood at 1.75 pc which is slightly higher than the 1.64 per cent in 2022-23. “ It is well within the prescribed limit as the state can bear a debt of Rs 5.75 lakh crore as per calculations based on GSDP”, remains the official stand on the subject. Last year this figure was Rs 4,50,000 crores. All is well, as the saying goes.

Lost in the welter of verbiage is the fact that  when the BJP first came to power in the state in 1995,the state’s public debt was around Rs 10,000 crores. By the time Narendra Modi became chief minister in 2001-2002, the debt had risen to Rs 45,301 crores. In 2014 when Modi left Gujarat to takeover as Prime Minister in New Delhi, the Comptroller and Auditor General of India(CAG) put the total public debt of the state at Rs 2.21 lakh crore. It had ballooned to an all-time of Rs 3.2 lakh crore in 2021-22,higher than the annual of Rs 2.4 lakh crore for 2022-23.

Last year the CAG had warned  that the state was headed for a debt trap because it has to pay back 61 per cent of the debt of over Rs 3 lakh crores over the next seven years. In layman’s terms, it must repay Rs 1.87 lakh crores by 2028. The same report had also pointed out that while the GSDP had grown at a compounded annual growth rate(CAGR) of 9.2 per cent between 2016 and 2021,publc debt has grown at a CAGR of 11.5 per cent.

Official statistics say that the state paid Rs 20,293 crores as interest and Rs 16,701 crores as principal amount in 2019-20,while in 2020-21, interest paid stood at Rs 22,099 crores and the principal was Rs 17,918 crores.

In the run-up to the Gujarat elections last year, Prime Minister  Narendra Modi had warned against the rising rash of ‘revadis’  ( freebies at state cost). The pulpit preaching, however, seems to have gone waste in his own home state with his own party government for the 23 per cent increase in budgetary allocation this year is matched by a 19 per cent increase in the quantum of subsidies provided in matching time. The budget documents put this figure at Rs 26,511 crores.

it begins with two free annual cooking gas cylinder refills to 39 lakh families (Rs 500 crores)), free travel for the physically challenged in state transport buses (Rs 52 crores), free bicycles to two lakh girls (saraswati sadhana yojna), free education through 400 ‘gyan-setu’ schools to two lakh student  from classes  6 to 12, in government schools (Rs 64 crores) and a Rs 12 crore subsidy for 10,000 students to purchase electric two-wheelers. Thereafter, it takes a quantum leap provisioning Rs 1500 crores in ‘ incentives’ to micro, small and medium enterprises (MSMEs) and an additional Rs 800 crores for big industrial units.

The crowning irony is that the industrial sector which has been availing  incentives and subsidies all along successive budgets including Rs 2300 crores in the present one, have Rs 57,394 crores in pending tax dues, some as old as a decade !

The state seems trapped in a vicious cycle. It borrows to build,  then splurges in incentives, subsidies and freebies. It first creates public sector undertakings(PSUs),  then over time, renders these  establishments sick through mismanagement and thereafter sells the sick shells to stem the rot and ‘recoup’ in peanuts. The cycle is unending- borrow-build ,splurge-sell- and all at public cost.

Now, Gujarat has decided to follow the Centre by disinvesting state run companies to meet capital expenditure targets. This is one year after the CAG had red-flagged 15 PSUs  as being ‘inactive’ or ‘under liquidation. Gujarat has 97 state PSUs ,64 government companies,29 government-controlled companies and four statutory corporations.

As per last year’s report, the accumulated losses of state public sector undertakings had grown to Rs 30,400 crores and the CAG had taken note of the fact that the government continues to invest in entities like the Gujarat State petroleum Corporation, whose net worth is completely eroded; Rs 1000 crores was invested in GSPC and Rs 469 crores in GSRTC even though both have negative net worth, it had noted.

 There is an old saying, both state and  society are endangered, not by the profligacy of a few, but by the laxity of the many !

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