This comes on top of the state closing the previous year with a 5 per cent fiscal deficit.
The Centre allows a state to borrow annually only 3 per cent of its GSDP and an additional 50 bps more on meeting certain reforms in the power distribution and public transport sectors.
Punjab’s fiscal stress will continue even in the medium-term and will remain one of the fiscally most stressed states, says Sunil Kumar Sinha, the senior director at the agency.
This is because the state’s fiscal plan for FY25-26 assumes 10 per cent nominal GSDP growth because the assumptions of own tax revenue growth of 15 per cent each in FY25 and FY26 also look optimistic.
On the other hand, revenue expenditure growth assumptions appear to be conservative as the same is assumed to grow at 5.5 per cent in FY25 and 8.6 per cent in FY26, while its average revenue expenditure growth during FY18-22 was 12 per cent.
He further notes that the revenue deficit is expected to be around 4 per cent of GSDP, which will be 50 bps higher than the budgeted, primarily due to the optimistic assumption on revenue receipts and nominal GSDP growth. According to the revised estimate, the state’s revenue deficit in FY23 came in at Rs 23,891 crore or 3.7 per cent of GSDP) almost double of the FY23 budget estimate of Rs 12,554 crore or 2 per cent as slippage in revenue receipt was Rs 1,815 crore. This was in spite of doing reasonably well on the tax revenue front.
Although its own tax revenue was lower by Rs 1,448 crore than budgeted, its share in Central taxes was higher by Rs 2,407 crore. The slippage mainly came from the lower non-tax revenue, which is expected to be Rs 32,260 crore compared to Rs 35,033 crore budgeted for FY23.
The slippage in the state’s own tax revenue (SOTR) is Rs 249 crore and the state’s share in Central taxes is Rs 2,524 crore. Yet, total expenditure in FY23 was higher by Rs 7,466 crore despite cutting capital expenditure by Rs 2,056 crore as revenue expenditure was higher by Rs 9,522 crore.
The FY24 budget assumes a nominal GSDP growth rate of 9.5 per cent. But the historical trend during FY16-22 shows only 7.4 per cent growth and given the prevailing macroeconomic environment, nominal growth will be lower at 8.5 per cent in FY24.
The budget also assumes the SOTR to grow 17.4 per cent in FY24 resulting in a SOTR/GSDP ratio of 7.4, up from 6.9 in FY23 and 6.4 in FY22, and the new target looks highly stretched, according to the agency as it expects the STOR to come in lower by Rs 2,905 crore at Rs 48,930 crore.
Similar are the non-tax revenue assumptions, which are budgeted at Rs 28,559 crore down from Rs 32,260 crore in FY23.
