The reports from the Comptroller and Auditor General (CAG) for fiscal year 2021-22 pointed to several fiscal misdemeanours of the State government and made pointed observations on financial handling across various sectors.
Top on the list was the Debt to Gross State Domestic Product (GSDP) ratio, pegged at 32.12 per cent, which is way above the upper limit of 25 per cent in the Fiscal Responsibility and Budget Management Act. Ironically, this ratio has been steadily rising for the past five years.
The debt to GSDP ratio is a measure that compares the two to derive an indicator that reflects the State’s ability to repay borrowings relative to the size of the economy. States like Maharashtra and Karnataka have recorded a ratio of 18 per cent, while others like West Bengal and Punjab have registered over 38 per cent.
Interestingly, the total outstanding debt of the State increased from Rs 18,552 crore in 2017-18 to Rs 29,118 crore in 2021-22, a whopping 57 per cent rise during the past five years. The scary part is that the total outstanding debt is more than twice the revenue receipts and over three times the State’s resources.
The CAG has recommended that the state government may work out a “well-thought-out” debt management strategy to avoid falling into a debt trap. Chief Minister Pramod Sawant understands the gravity of the situation but surprisingly prefers to take comfort in not breaching the fiscal deficit threshold of 3 per cent. The CM has been banking on mining revenues, GST collections and excise revenues; however, mining is yet to resume and may take longer than expected; there have been severe excise revenue leaks with an incorrect levy of licence fees.
The borrowing has been marginally below 3 per cent of the limit at 2.96 per cent, but this cannot be a fair reading to conclude ‘all is well’. In this context, Sawant must focus on strategic fiscal planning while emphasising revenue generation. The rate at which the fiscal deficit is rising is alarming and could put the State in a precarious situation.
Another major red flag raised by the CAG is over possible misuse of public money to Rs 1,971 crore. The report points to the fact that 26 departments have not submitted utilisation certificates totalling Rs 10,534 as on March 2022, putting a huge question mark over Rs 1,971 crores of public money.
This indicates that departments have not come forward to give an account of their fund utilisation which is questionable and suspicious. There has to be accountability of funds, and the government, in the more considerable interest of the State, must ensure that funds are spent judiciously as per plans.
Lastly, the CAG has slammed the government for being unable to rectify several irregularities in reports, including the failure to respond to observations on 323 inspection reports pending compliance involving revenue of Rs 3,571 crore. The audit reports must be taken seriously, and the government must initiate course correction and rectification to steer the economy away from foreseeable fiscal dangers instead of hiding the embarrassment and finding ways to dodge the findings of audit reports.
