ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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UP on the Financial Brink

State Governments Budget 2001-2002

With the lowest ratio, among all the states, of per capita tax revenue to per capita income, successive state governments in UP have relied on the soft option of borrowing. Interest payments, establishment and pensions together with debt repayment account for over 70 per cent of total government expenditure. Not surprisingly, it has been necessary to effect a cut in expenditure on economic services in the government's budget for 2001-2002.

UP’s growth rate is about half thenational growth rate. Per capitaincome which was almost equal tonational per capita income at the beginningof planning era is now only half of it. Percapita plan outlay in UP is the lowestamong all the states. So is the case withper capita tax revenue. The state has notcared to mobilise resources and to put themto productive uses. Per capita tax revenueas a percentage of per capita income in UPis the lowest among all the states andsuccessive finance ministers in UP havebeen taking pride in the fact that no newtax is being imposed.

The state has relied on the soft optionof borrowing and now has resorted to anabsolute cut in expenditure on economicservices for the first time to contain thefiscal deficit. During 199099 the averageannual rate of growth of public debt in UPwas 16.4 per cent which was higher thanthe national average of 15.4 per cent. Theaverage growth rate of revenue during thesame period was 12.5 per cent in UP asagainst 14.4 per cent for the states. Debtas a ratio of state domestic product was30.7 per cent during 199093 which rose to 33.6 per cent in 199697. The state’sown resources as a ratio of aggregatedisbursement declined from 33 percent during 199093 to 31 per cent during199699. It was the lowest in UP amongall the states except Orissa. Bihar hadalmost the same ratio. The debt servicingratio (ratio of interest payments to revenuereceipts) currently at 31 per cent is thehighest among all states except Orissaand Punjab. But the state appears to beoblivious to the rising debt burden andcontinues to rely on borrowing to financeits expenditure.

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