Fiscal prudence helped state avoid revenue deficit

Neena Sharma

Tribune News Service

Dehradun, February 25

By practising fiscal prudence, Uttarakhand has come good on the fiscal management front. As a result, it will not receive grants from the Centre to take care of its financial health (as there is no revenue deficit), as recommended by the 14th Finance Commission in its report that the NDA government has accepted.

Uttarakhand does not figure in the group of 11 revenue deficit states that will receive a grant of Rs 1.94 lakh crore over next five years after the Finance Commission recommendations are accepted. “Eleven states that will receive grants from the Centre have been facing a chronic problem of revenue and expenditure mismatch. These states have been unable to control expenditure, which has been more than revenue receipts,” said Indira Hridayesh, Finance Minister.

Significantly, Uttarakhand has consistently performed well on the financial management front. As a result, it did not receive any grants under the 13th Finance Commission as well. The only time it received grants of Rs 5,000 crore to manage its revenue deficit was on the recommendation of the 12th Finance Commission.

Significantly, it was rewarded for its efforts and had received an incentive of Rs 10,000 crore from the Centre for adhering to the Fiscal Responsibility Budget Management (FRBM) Act measures.

Government officials say despite geographical constraints and limited resources, Uttarakhand has managed its finances well in conformation to the FRBM Act, 2003, passed by Parliament. “This is in fact appreciation for the state that has been battling disasters every year but still keeping its fiscal health in a good shape. The Centre needs to put a mechanism in place for rewarding states that are practising financial prudence, so as to encourage them to avoid falling into a debt trap,” said Rakesh Sharma, Additional Chief Secretary, Finance.

Officials say despite facing stiff opposition to hydropower projects, Uttarakhand has tried to increase its revenue receipts through non-tax sources like mining, service fee and transit fee.

The state has also managed to keep non-plan expenditure in check, which is less in comparison to Himachal Pradesh and Punjab due to lesser number of government employees. Staff hiring in the state is also being done through outsourcing and other measures.