Excelsior Correspondent
JAMMU, Feb 23: Minister for Finance and Ladakh Affairs, Abdul Rahim Rather today allayed the apprehensions of some members of the House that the State has plunged into a debt trap and the fiscal deficit of the State is on rise.
Replying to the supplementaries on a question of Sofi Abdul Gaffar regarding State’s fiscal deficit in the Legislative Assembly, the Finance Minister said fiscal deficit of the State is on continuous decline, adding that as against the target of 4.2%, for the last financial year, it stood at 3.37%. Similarly, the total outstanding debt as a percentage of GSDP for the State stood at 49.67%, which was well below the ceiling of 53.6%, he added. He said that these targets have been prescribed by the Fiscal Responsibility and Budget Management Act.
Mr. Rather also presented the year wise figures since 2005-2006 to explain that the fiscal deficit which was alarmingly high at 9.92 % against the target of 5.5% in 2005-2006, has come down to just 3.37% during the last fiscal (2012-13).He said in 2006-07 and 2007-08 the fiscal deficit was much more than the prescribed targets, adding that it was 6.66% in 2006-07 against a target of 5%, 7.14% against the target of 4.5% in 2007-08 and 7.78% against target of 4% in 2008-09, however after 2009-10, when the present Government initiated various institutional measures in the path of fiscal correction and consolidation, the State’s fiscal deficit came under control and has remained well below the targets at present . In 2010-11 it was only 4.15% against the target of 5.3% and further came down to 4.2% against the target of 4.7% in 2011-12. It further reduced to 3.37% against the target of 4.2% during the last financial year (2012-13).
Similarly, he said, the State’s total outstanding debit as a percentage of GSDP has remained within the prescribed limits under FRBM Act since 2010-11, adding that it was 52.6% against the permissible limit of 56% in 2010-11, 51.84% against the limit of 55.1 % in 2011-12 and 49.67% against the limit of 53.6% in 2012-13. He added that these year-wise figures clearly show that the State’s debt percentage was within the permissible limits and it was totally incorrect to say that the State was heading towards a debt trap.
The Minister said the State has also taken measures like rationalization of tax structure, introduction of new pension scheme, stipendiary mode of recruitment; VAT reforms, etc to streamline its fiscal management.
The Minister said that on the recommendation of the twelfth Finance Commission, the State passed the FRBM Act in 2006 which has been amended in 2009 to incorporate the recommendations made by the thirteenth Finance Commission. The Act determines the targets for fiscal deficit and other budgetary responsibilities of the Government.
About steps taken towards fiscal consolidation, the Minister said the process of fiscal reforms has been started by the State Government by liquidating its structural overdraft (OD) liability of Rs. 2965 crore with the J&K Bank as it stood on 01-04-2010 and shifting to arrangements of Ways and Means with RBI, by which measure the State has not only saved approximately Rs. 225 crore per year on interest outgo but has also, in fact, made an earnings of approximately Rs. 35 crore till now. The Minister said the present Ways and Means System with RBI has proved to be advantageous to the State Government, adding that an outright grant of Rs. 1000 crore has flown to the State Government during the year 2010-11 to liquidate the Over Draft with the J&K Bank. In addition, Rs.1300 crore Open Market Borrowing was allowed to the State Government for liquidation of the Over Drafts outside the FRBM arrangements. He said that the WMA facility is available to the State Government on ratio-rate fixed by the RBI from time to time, without any other transaction/commission charges by the RBI.
Abdul Rehman Veeri, M. Y Tarigami, Ashwani Sharma and Nasir Aslam Wani raised supplementaries on the question.
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