fiscal deficit

Arunachal Pradesh Public Finance and Fiscal Policy

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Arunachal Pradesh Public Finance and Fiscal Policy

The own resource of the State to finance its budget is very low, and the state is highly dependent on the central inflow. Thus, the budgetary policy of the government is constrained by limited own resources on the one hand, and high unit cost of supply of public and merit goods, on the other.

The economic reform process initiated by the central government in the beginning of the 1990s has also constrained the state in terms of access to soft central resources. Adding to it, due to implementation of 6th pay commission, has resulted in bulging of the public debt which reached 68.9 per cent of the GSDP in 2006-07 and more than 100 percent in2008-09.Arunachal Pradesh Public Finance and Fiscal Policy

Further, easy access to market borrowing (after the implementation of 12th Finance Commission Report) has refueled the process, and as a result, outstanding liability of the state as shown in the budget of 2007-08 climbed to 100 percent of GSDP in 2008-9. It is with this background that the finance and fiscal issues of the state have to be considered.

Broad Budgetary trend

From 1993-94 to 2000-01, except the years 2000-01, the state had surplus in revenue account (Arunachal Pradesh Development Report, 2009). The surplus was more than 10 percent of GSDP. From 2001-02 to 2005-06 the surplus was less than 5 percent. From 2006-7 onwards the surplus became more than 10 percent in average up to the year 2012-13.

The trend in fiscal deficit is also same in line of revenue deficit. It was 3 to 9 percent of GSDP in between 1993-1998-99. In 1999-2000, it went up above 40 percent of GSDP then remained stable around 15 to 20 percent of GSDP).

From 2001-2 to 2005-06it was hovering around 12 to 15 percent of GSDP. After the stricture given by 12th Finance commission, fiscal deficit came down to less than 5 percent of GSDP up to in 2006-07, 2007-8 and in 2009-10.

Again from 20011-12 onwards fiscal deficit is hovering around 10 percent of GSDP. Interest payment as a percentage of GSDP was around 5-6 percent in between 1993-94 to 2000-01. From 2001 to 2006-7 it remained around 4 percent and there after started declining and became 2.46 percent in 2012-13.

Outstanding Debt

Market Loan: Share of Market loan in total outstanding liability has undergone a significant change over time during 1991-92 and 2007-08.1 In Arunachal Pradesh, the share went up from 12.24 percent in 1991- 92 to 19.27 percent in 2006-07. Then, with some variation marker loan alone constitute 26.44 percent of total outstanding liability in 2013-14. Thus, over time, market loan is gaining importance in the state.

 NSSF: As discussed above, NSSF became a separate head in the debt accounting system in 1999-2000. Therefore, here the analysis will pertain to the period 2000-01 and 2013-14. In 2000-01, NSSF had a small share of 0.14 percent in 2001-02. In 2006-07, the share became 19.27 percent in Arunachal Pradesh and hovered around as low as 9 percent in 2008-09 and became 15.63 percent in 2013-14.

Loan from Financial institutions: Under this head also a significant change in share was observed during 1991-92 and 2007-08 in Arunachal Pradesh. It was as low as 0.14 percent in 2000-01 and as high as 21 percent in 2006-07. Subsequently remained around 15-17 percent thereafter.

Loan and Advance from the Central government: Central government’s Loan and Advance to the states was around 56.33 percent in 2006-07 in Arunachal Pradesh.Wihh a steady decline it became 6.97 percent in 2013-14. Thus, in 2006-07, a drastic fall in the share of Central government loan in total outstanding debt liability took place. This was basically due to conversion of high interest rate bearing central loan by low interest loan from the market and financial institution. Further, it happened because of 12th Finance Commissions’ incentives.

 Public Accounts: Share of Public accounts in total debt liability was 40 percent and above in the state in 1991-2.Within the public accounts share of provident fund increased from 11.54 percent in 1991-92 to 36.33 percent in 2006-07. Then it declined to 11 percent in 2008-09. In between 2009-10 and 2013-14 it remained around 23 to 25 percent.

Implementation of FRBM Act in Arunachal Pradesh

In Arunachal Pradesh FRBM Act has been implemented since 2006-07. FRBM Act’s provisions were passed into a law in March 2006. Since then the State Government  has been implementing the different provisions in letter and spirit. The FRBM Act was amended in 2010-11 and the following targets were set:

  • To maintain revenue surplus in all the years from 2010-11 to 2014-15;
  • To reduce fiscal deficit to 3 per cent of GSDP by 2011-12 and maintain the
  • Same during 2011-15, The amended FRBM set the year-wise target of total debt in relation to the State’s GSDP.

Composition of Revenue

The tax collected by the Government of Arunachal Pradesh constitutes a small portion, less than 5 percent, of the total revenue at its disposal. The rest are share of central tax, the state’s own non-tax revenue, and most important of all, the grant from the Central Government.

From 2001-02 to 2011-12 own tax of the state averaged 3.63 percent of the total revenue. On the other end of the spectrum is the grant from the Central Government, which averaged as high as 84.06 percent of the total revenue. Not only own-tax revenue, but also the share of the central tax is not high, being only 12.31 percent of the total during the eleven-year period from 2001-02 to 2011-12.

Total tax, own and central share, averaged 15.94 percent of the total during 2001-12. Compared with the own tax, the state’s own non-tax is high averaging 11.92 percent of the total revenue during 2001-02.

Revenue and Capital expenditure

The overall expenditure of the Government of Arunachal Pradesh is dominated by what is called ‘consumption; the revenue part of the expenditure varied during 2001-12 from a low of 66.68 percent to a high of 74.62 percent of the total.

The capital expenditure varied between 25.38 percent of the total to 33.32 percent. Table 2. 3 shows the composition of expenditure and its magnitude in the State’s GSDP. The Government expenditure is very high in the state forming more than 50 percent of its GSDP.

The expenditure varied during 2001-12 between 53.82 percent of the GSDP, the lowest value and 74.77 percent, the highest value. The revenue expenditure varied from a low of 39.67 percent of the GSDP in 2011-12 to a high of 50.49 percent of the GSDP in 2008-09. The capital expenditure as the percentage of the GSDP was lowest in 2001-02, only 13.66. This percentage reached the peak during the reference period in 2008-09 when it was 24.28 percent of the GSDP.

 

Main Features of Arunachal Economy

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Main Features of Arunachal Economy

Introduction

  • The economy of Arunachal Pradesh is predominantly agrarian. Agriculture and allied activities have overriding importance as a source of livelihood to the people of Arunachal Pradesh.
  • The State’s economy is characterized by persistent stringent financial situation marked by a very low level of State’s own resources co-existing with high level of borrowing.
  • The State has been suffering from impaired economic development due to bottlenecks in development of roads, civil aviation etc. in terms of per capita State Domestic Product and other development indices such as power, road length, Arunachal Pradesh ranks below national average.
  • Arunachal Pradesh is one of the Special Category States and is largely dependent on Central Assistance for Plan investment as the scope of internal mobilization of resources is limited in Arunachal Pradesh in view of low tax base. Therefore, the prime mover of the growth of the economy has been the flow of funds from the Centre.
  • The relatively isolated economies of the tribal communities of the area, which were later reorganized as Arunachal Pradesh, were gradually integrated into the larger economy only after independence, and more particularly after the Indo-China war of 1962. Apart from the relatively late exposure to modernization, another specificity of the historical transformation of the Arunachal economy was the role of the State as the prime mover in this process of gradual transformation and integration of the economy.
  • Arunachal Pradesh has now witnessed remarkable social and economic changes within a comparatively short period of time. The State’s economy has not only experienced a remarkable growth over the past decades, it has diversified from agriculture and forestry based subsistence economy into a market economy.
  • In 1970-71 the per capita Net State Domestic Product (NSDP) of Arunachal Pradesh was 56.14 percent of the per capita national income. Starting from a very low base, Arunachal’s per capita income increased at a faster rate than the country’s national income.
  • The predominantly barter economies are in the process of being transformed into a monetized economy. The market institutions are still underdeveloped in many respects, and there is a great deal of regional variations in the degree of integration with the market economy.
  • There is a significant change in terms of land tenure system, which is steadily leading to individual ownership by making collective ownership (clan, village, community ownership) a marginal phenomenon. In urban or semi-urban areas, land became a commodity for earning cash and ‘brewing social conflicts’
  • Subsistence nature of farming coupled with modern consumption structure is the driving force behind the changing economic institutions in Arunachal Pradesh. The rural urban migration, due to pull factors in the state, has resulted in substantial increase in employment in service sector. Thus, the process of modernization has led to the transformation of the traditional economic institutions in the State.
  • In the context of Arunachal Pradesh, power sector is the most vital infrastructure input for socio- economic development and has assumed centre stage because of huge hydropower potential.
  • At the time of independence there were less than 100 km. of dirt roads. At the time attaining statehood in 1987 the total road length was only 3419 km and today it stands at 21066.36 km i.e., 25.16 km/ 100 sq. km a quantum jump in progress.
  • The prospect of creating an industrial base in the state seems daunting in the light of the ecological and economic specificities of the state. However, a carefully designed strategy for establishing specific industries having strong forward and backward linkages has been envisaged in the New Industrial Policy-2008 of the State.

Economic Reforms

The Government of Arunachal Pradesh has been pursuing economic reforms for speedy development. There has been a significant fiscal correction in the last couple of years. Major reforms initiated by the State are

  • The State has taken various measures to curtail non-plan and unproductive expenditure and to increase State’s Own tax and non-tax revenue. The State’s own tax which was around Rs. 37.00 crore has now jumped to above Rs.80 crore this year. Because of various initiatives in development of hydropower, mines and minerals etc. The non-tax revenue is also increasing substantially.Main Features of Arunachal Economy
  • The State Govt. has enacted the ‘Fiscal Responsibility and Budget Management (FRBM) Act 2006’ and in accordance the ‘Arunachal Pradesh Fiscal Responsibility and Budget Management Rule 2007’ have been framed to ensure prudence in fiscal management.
  • Mobilization of State’s own resource is pre-requisite for financing the annual plan. The Finance Department is in constant touch with revenue generating departments and monitoring meticulously for greater revenue generation.
  • The gross fiscal deficit which was at 13.85% of GSDP in 2004-05 has been reduced to 3.57 in 2007-08. • Serious restrictions have been put for the non-developmental expenditure including the post creation. • The Plan schemes are now being executed in Project Mode with the introduction of the concept of non-divertible earmarked allocation. The State Govt. has constituted very high level committee under the Chairmanship of the Chief Secretary to scrutinize the project proposals.
  • The State Govt. has notified “Hydro Electric Power Policy 2008” to accelerate investments in development of hydro power projects having installed capacity above 25 MW. The Govt. of Arunachal Pradesh had also announced “Small Hydro Power Policy 2007“for small hydro power projects upto an installed capacity of 25 MW.
  • The State PWD has reduced its manpower by 7000 Nos. through VRS. It will lead a saving of Rs. 30.00 crore per year. Other departments with surplus man-power are also working out the modalities.
  • To minimize the burden of committed liabilities of salary, Government of Arunachal Pradesh has transferred 13265 Nos. Plan posts of 37 Nos. departments from 7th Five Year Plan onwards during Annual Plan 2008-09 in the first phase. Transfer of remaining 8 Nos departments as well as committed liabilities of 8 departments will be taken care in the second phase during Annual Plan 2009-10. As a result provision Direction and Administration has been reduced to 27.69% during 2008-09 compared to 44.14% during Annual Plan 2007-008.

 

02.02.18 Arunachal Pradesh(APPSC) Current Affairs

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NORTH-EASTERN STATES

  • Budget brings hope to bamboo-rich northeast

 

  • Bamboo is essentially a type of grass, but its classification as a tree for 90 years prevented the northeast, which grows 67% of India’s bamboo, from exploiting it commercially unlike China, the only country with richer bamboo genetic resources.

 

  • Now Budget 2018 has ignited farm hope for this tree-turned-grass which once fuelled insurgency in the northeastern states. The allocation of ₹1,290 crore for a restructured National Bamboo Mission (NBM) has raised hopes for a range of bamboo-based industries – from food professing to construction.

 

  • Bamboo is a wonder, multi-utility grass that more than 300 ethnic groups in the northeast have traditionally been using in every stages of life, from birth to death, besides it being a delicacy. Bamboo’s commercial journey began when it was struck off the list of trees by amending the Indian Forest Act last year.

 

  • The Budget provision is one of the best initiatives to promote holistic development of bamboo. But the restructured NBM needs to be more focussed on value-chain management and value-addition of bamboo at community level which will bring more income to the bamboo farmers and bamboo processors.

 

 

INTERNATIONAL

 

·        India Slips to 42nd Place On EIU Democracy Index, Norway Tops

 

  • India slipped to 42nd place on an annual Global Democracy Index according to the data compiled by the Economist Intelligence Unit (EIU). India has moved down from 32nd place last year.
  • The top 5 Countries in the list are

    Norway,

    Iceland,

    Sweden,

    New Zealand and

    Denmark

 

  • The index ranks 165 independent states and two territories on the basis of five categories: electoral process and pluralism, civil liberties, the functioning of government, political participation and political culture.

 

  • The list has been divided into four broad categories- full democracy, flawed democracy, the hybrid regime and authoritarian regime.

 

  • North Korea is ranked the lowest at 167th, while Syria is a notch better at 166th place.

 

 

·        India Joins Ashgabat agreement

 

  • India joined Ashgabat Agreement on the establishment of an International Transport and Transit Corridor between the Iran, Oman, Turkmenistan, and Uzbekistan.
  • The agreement was signed in 2011, which envisages facilitation of transit and transportation of goods between Central Asia and the Persian Gulf.
  • According to the External Affairs Ministry, the accession to the Agreement would diversify India’s connectivity options with Central Asia and have a positive influence on its trade and commercial ties with the region.

 

NATIONAL

 

  • Union Budget 2018: Key takeaways and sector-wise highlights

 

  • Finance Minister Arun Jaitley delivered the current government’s fifth and last full financial budget (Budget 2018 for the fiscal year 2018-19) amid subdued economic growth, challenging fiscal situation and farm distress.

 

Here are the key highlights from the Union Budget 2018:

Economic Health

  • Economy firmly on course to achieve high growth of 8%
  • GDP growth at 6.3% in the second quarter of 2017-18 signals turnaround of the economy
  • Growth in the second half likely to remain between 7.2% to 7.5%

Agriculture and Rural Economy

  • MSP for all unannounced Kharif crops increased to 150%
  • Institutional credit for agri-sector increased to Rs.10 lakh crore in 2017-18
  • Fisheries, aquaculture and animal husbandry corpus at Rs.10,000 crore
  • New scheme Operation Greens with an outlay of Rs 500 Crore
  • Govt to develop and upgrade existing 22,000 rural haats
  • Agri-Market Infrastructure Fund with a corpus of Rs.2000 crore
  • Allocation for Ministry of Food Processing doubled to Rs.1400 crore
  • Loans to Self Help Groups (SHG) of women to increase to Rs.75,000 crore by March 2019.
  • Increased allocation of National Rural Livelihood Mission to Rs 5750 crore
  • Under Ujjwala Scheme distribution of free LPG connections will be given to 8 crore poor women
  • Housing for All by 2022 – more than one crore houses to be built by 2019 in rural areas

Education, Health, and Social Protection

  • Estimated budgetary expenditure on health, education and social protection at Rs.1.38 lakh crore
  • Ekalavya Model Residential School to be set up for tribal children
  • Investments for research & infra in premier educational institutions at Rs.1 lakh crore in next 4 years
  • Allocation on National Social Assistance Programme at Rs. 9975 crore
  • NHPS to cover over 10 crore poor and vulnerable families (approximately 50 crore beneficiaries)
  • NHPS to provide coverage up to 5 lakh rupees per family per year for hospitalisation
  • Rs 1200 crore for the National Health Policy, 2017 – additional Rs.600 crore for TB patients
  • 24 new Government Medical Colleges and Hospitals

Medium, Small and Micro Enterprises (MSMEs) and Employment

  • Major thrust for Medium, Small and Micro Enterprises (MSMEs) – allocation at Rs. 3794 crore
  • Target of Rs.3 lakh crore for lending under MUDRA Yojana
  • 70 lakh formal jobs to be created this year
  • Govt to make 12% contribution of new employees in the EPF for all the sectors for 3 years
  • Outlay of Rs.7148 crore for the textile sector
  • Increase budgetary allocation on infrastructure for at Rs.5.97 lakh crore
  • To develop 10 prominent tourist sites into Iconic Tourism destinations
  • 35000 kms road construction in Phase-I at an estimated cost of Rs.5,35,000 crore

Railways

  • Railways Capital Expenditure pegged at Rs.1,48,528 crore
  • 4000 kilometers of electrified railway network slated for commissioning
  • Work on Eastern and Western, dedicated freight corridors
  • Over 3600 km of track renewal targeted in current fiscal
  • Redevelopment of 600 major railway stations
  • Mumbai’s local train network to have 90 kilometers of double line tracks at Rs.11,000 crore cost
  • 150 km of additional suburban network planned for Mumbai
  • Suburban network of 160 km at for Bengaluru metropolis

Air Transport

  • To expand airport capacity more than five times to handle a billion trips a year
  • Regional connectivity – 56 unserved airports and 31 unserved helipads to be connected
  • To establish unified authority for regulating all financial services

Digital Economy

  • NITI Aayog to initiate a national program to direct efforts in artificial intelligence
  • Department of Science & Technology to launch Mission on Cyber-Physical Systems
  • Allocation doubled on Digital India programme to Rs 3073 crore
  • To set up 5 lakh wifi hotspots to provide net-connectivity to five crore rural citizens
  • Rs. 10000 crore for creation and augmentation of telecom infrastructure

Defence

  • Development of two defence industrial production corridors.
  • Allocation of Rs 2.95 lakh crore to defence sector.

Emoluments

  • To revise emoluments to Rs.5 lakh for the President
  • Rs 4 lakhs for the Vice President
  • Rs.3.5 lakh per month to Governor
  • Pay for Members of Parliament – law for automatic revision of emoluments every 5 years
  • 150th Birth Anniversary of Mahatma Gandhi- Rs.150 crore for commemoration programme

Fiscal Management

  • Budget Revised Estimates for Expenditure at Rs.21.57 lakh crore
  • Revised Fiscal Deficit estimates at 3.5% of GDP
  • To bring down Central Government’s Debt to GDP ratio to 40%

Jaitley announces ‘world’s largest healthcare programme’

Finance Minister Arun Jaitley announced two new initiatives under the Ayushman Bharat Programme in the Union Budget 2018.

  • Under the programme, Mr. Jaitley announced a new flagship National Health Protection Scheme, providing a health insurance cover of ₹5 lakh a family per annum.
  • The scheme will cover 10 crore vulnerable families, with approximately 50 crore beneficiaries.
  • Mr. Jaitley also announced the creation of health and wellness centres, which will “bring healthcare closer to home”.
  • These centres, 1.5 lakh in number, will provide free essential drugs and diagnostic services. A sum of Rs. 1200 crore had been allocated for this.

·         Thirty Second Surajkund International Crafts Mela Begins

 

  • The 32nd Surajkund International CraftsMela begun in Faridabad, Haryana.

    The Mela is organized by the Surajkund Mela Authority and Haryana Tourism in collaboration with Union Ministries of Tourism, Textiles, Culture and External Affairs.

    The 17-day cultural extravaganza will see a spectacular showcase of regional and international crafts, handlooms, traditions along with some mouth-watering multi-cuisine food for the visitors.

    This year Uttar Pradesh is the theme state and Kyrgyzstan is the Partner Nation.