Chandigarh: As the Aam Aadmi Party (AAP) government in Punjab celebrated the completion of its fourth year in power, a report of the Comptroller and Auditor General (CAG) warned of “heavily stressed state finances” with its debt and liabilities accounting for 44.27 percent of the GSDP.
The CAG report for the state’s finances for 2023-24 has put the total debt and liability figure at Rs 3.46 lakh crore. The budget presented 8 March estimated debt to touch Rs 4.42 lakh crore in the next financial year.
While the debt burden was estimated to be Rs 3.96 lakh crore lakh crore in the last budget, the revised estimates showed it shot to Rs 4.07 lakh crore.
The CAG report tabled on the last day of the Punjab Assembly’s Budget session points out that the government debt has grown at a compound annual average rate of 9.16 percent between 2019-2020 and 2023-2024.
The debt-to-GSDP ratio, the report said, has grown at a rate indicating that stabilization may not be possible in the future. It pointed out that depending solely on economic growth would not suffice to cover the state’s debt obligations.
The CAG’s wake up call to the Punjab government came on a day when Chief Minister Bhagwant Mann released a booklet of the achievements of his government since he took over on 16 March, 2022.
At a press conference, Mann said his party fulfilled every promise made to the people of Punjab while also putting the state on a track of growth and prosperity.
The CAG, however, noted that revenue deficit and fiscal deficit has increased several fold since 2019-2020 despite the increase in revenue. The continuous mismatch, it said, between receipts and expenditure indicates rising fiscal stress.
Between 2019-20 and 2023-24, revenue expenditure increased from Rs 75,860 crore (14.13 percent of GSDP) to Rs 1,17,407 crore (15.76 percent of GSDP). It consistently made up a significant portion (80 to 96 percent) of the total expenditure during this period, growing at a compound annual growth rate of 11.54 percent.
It added that more than 75.6 percent of the state’s revenue was spent on committed expenditures like servicing the huge debt liabilities, salaries and pensions and inflexible expenditure and only a very little amount was spent on capital resulting in the building of infrastructure and services.
The state government spent Rs 4,743 crore only on the capital account, accounting for 3.88 percent of the total expenditure in 2023-24. Capital expenditure was just 4.40 percent of the total borrowings. “Thus, the borrowed funds were being used mainly for meeting current consumption and repayment of borrowings instead of capital creation/development activities,” the report said.
It pointed out that the share of grants-in-aid in revenue receipts decreased from 23.68 percent in 2019-20 to 16.03 percent in 2023-24, indicating decreased reliance on support from the Centre.
Mann, in his press conference, had again pointed out that the Centre was extremely unfair to Punjab in having not given the rural development fund (RDF) as also the Rs 1,600 crore announced by the Prime Minister as flood relief. “We have gone up to the Supreme Court to get the RDF released. What more can we do now,” he said.
The CAG report added that a large part of the non-committed expenditure was spent on subsidies which had increased from 13.39 percent of the total revenue in 2019-20 to almost 16 percent in 2023-24.
“Power subsidies constituted a significant portion, ranging from 92 percent to 99 percent of the total subsidies during this period,” the report said.
Weak fiscal consolidation
The CAG report pointed out that Punjab was unable to comply with provisions of the State Fiscal Consolidation Roadmap under the Fiscal Responsibility and Budget Management (FRBM) Act on some accounts.
“The target of revenue deficit was 3.52 percent of GSDP, whereas the target for fiscal deficit was 4.60 percent against which the revenue deficit was 3.79 percent and fiscal deficit was 4.45 percent respectively. Debt was 43.72 percent as against the limit of 46.81 percent,” it said.
“Further, if the quantum of the off-budget borrowings is included as part of debt, the overall liability (includes Public Debt and Public Account Liabilities) of the government was 44.27 percent of the GSDP. Going by the fiscal trends, the finances are heavily stressed.”
The chief minister, however, painted an impressive picture of the state’s finances, saying that Rs 53,122 crore was expected from the excise policy in five years, i.e., nearly double the revenue of the previous government.
Rs 30,367 crore was earned from stamp and registration, which is around 2.5 times more than the previous government, he said.
“GST collection has also seen a major jump as Rs 83,739 crore GST has been collected in just 46 months which is higher than the Rs 61,286 crore collected by the previous government in five years,” he said.
“Strong financial management has reduced Punjab’s debt-to-GSDP ratio from 48.25 percent in 2022 to 44.47 percent in 2026.”
(Edited by Tony Rai)
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