Bhubaneswar: Due to robust fiscal management, Odisha is estimated to be lower than the average of all States on committed expenditure, mainly on account of lower expenditure on salaries and wages, a report said.
Committed expenditure of a State typically includes expenditure on payment of salaries, pensions, and interest payments. Expenditure on these items usually cannot be rationalised in the short to medium term. A larger proportion of the state budget being allocated for committed expenditure crowds out expenditure on other development activities, said the Report on State of State Finances released by PRS India.
In 2023-24, states on aggregate have budgeted to spend 53% of their revenue receipts on committed expenditure items. This includes 28% of revenue receipts to be spent on salaries and wages, 13% on pension, and 12% on interest payments.
Himachal Pradesh, Kerala, Nagaland, and Punjab are estimated to spend at least 70% of their revenue receipts on committed expenditure. On the other hand, expenditure by Bihar, Jharkhand, and Odisha is estimated to be lower than the average of all states, mainly on account of lower expenditure on salaries and wages, it said.
Taking Odisha as a case study, the PRS Report said the State Government can borrow from various sources to finance their fiscal deficit. These sources include open market borrowings, loans from Central Government, loans from financial institutions, and public accounts.
Market borrowings form the most significant source for most States to finance their fiscal deficit. In 2021-22, states on aggregate financed 68% of their gross fiscal deficit from open market borrowings (as per revised estimates). However, Odisha did not resort to open market borrowings in 2021-22 and 2022-23, it noted.
Instead, the State availed loans from the Odisha Mineral Bearing Area Development Corporation (OMBADC) and the State Compensatory Afforestation Fund.
The State Government can borrow up to 60% of the surplus amount available in these dedicated funds, and the borrowed amount is available at a lower interest rate than open market borrowings.
In the past, Odisha has also swapped and prepaid loans raised at higher interest rates. This, along with financing its deficit from alternate sources, has allowed the state to lower Its interest payments. As per the budget estimates of 2023-24, the State Government will raise Rs 11,303 crore through market loans.
Odisha Government has released 100 per cent of the grants to the ULBs during 2021-22 and 2022-23.
The FC has granted worth Rs 3.58 lakh crore to be given to States for rural and urban local bodies (ULBs). It also recommended grants worth Rs 1.21 lakh crore for ULBs between 2021-22 and 2025-26.
However, several states have not been able to avail the entire amount of recommended ULB grants in 2021-22 and 2022-23. On aggregate, states could avail only 73% and 66% of the ULB grants in 2021-22 and 2022-23 respectively. Certain north-eastern states such as Arunachal Pradesh, Meghalaya, Manipur, and Nagaland did not receive any ULB grants in 2021-22.