‘States may miss FY19 fiscal targets’

Spending on elections, other populist measures to blame, says ICRA
Funding of farm loan waivers, poll-related spending and other populist measures are likely to ensure that States are set to miss their fiscal consolidation targets budgeted at the beginning of the year, says a report.
“Given the factors such as funding of crop loan waivers, election-related spending and the flood relief will see the States miss their fiscal consolidation targets,” ICRA wrote in a note. The States’ fiscal deficit is primarily financed by issuing State development loans (SDLs). In April-August of FY19, gross issuance of SDL contracted by 3.4% to Rs. 1.32 trillion, primarily led by a sharp decline in issuance by Uttar Pradesh, Maharashtra and Gujarat.
However, excluding these three States, total SDL issuance by the remaining States has grown 14.7% in the first five months of FY19. Recently, the Reserve Bank of India had estimated that fiscal deficits of all the 29 States might decline to 2.6% of their gross State domestic product (GSDP) citing their FY19 Budget estimates, from 3.1% in FY18.
But an analysis of the FY19 Budgets of nine States, accounting for about 62% of the combined GSDP of all 29 States in FY17, shows that their fiscal deficits are budgeted to slip to 2.5% of GSDP in FY19 from 2.6% in FY18.
As 12 of the 29 States, three of which were part of the nine included in the analysis, are also poll-bound, apart from the general elections before May 2019, there is a risk of new schemes being announced or a higher allocation for welfare schemes, the note said.
The unforeseen expenditure on flood relief in states like Kerala and Karnataka, which may not be fully offset by higher grants or other revenue mobilisation measures, can exert pressure on their fiscal balances, it said.
Source :  https://www.thehindu.com/todays-paper/tp-business/states-may-miss-fy19-fiscal-targets/article24963525.ece

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