1 Budget Analysis Rajasthan Budget Chief Minister Ashok Gehlot presented the General Budget to the State Assembly on 26 th of March, In his address, he commented on the fiscal performance of the State in and laid out his budget proposals for This document presents a brief analysis of the Budget. It contains the following: Budget highlights Key financial indicators Revenue analysis Expenditure analysis (budgeted expenditure by sector) Explanations to technical terms used in the Budget are provided as boxed sections in relevant parts of the document. Budget Highlights - Budget estimates for project revenue receipts increasing to Rs. 63,147 crore, from Rs 56,121 crore in The government is estimated to generate a revenue surplus of Rs. 443 crore in the closing. In , this surplus is estimated to increase to Rs. 927 crore. - Revised estimates indicate that the government bettered its fiscal deficit target by Rs. 376 crore. For , fiscal deficit as a percentage of state GDP is now estimated at 2.09%. In , the fiscal deficit is estimated to be 2.14%. - Borrowings and other liabilities continue to remain the main source of capital receipts; Rs. 13,766 crore is estimated to be borrowed in This consists of Rs. 11,229 crore of internal debt, 1,261 crore as loans from the central government and Rs from the public account. - The total outstanding liability of the state for is estimated to equal 29.06% of state GDP. In , this is estimated to reduce to 28.65%. - The government is estimated to spend Rs. 22,178 crore on Economic Services in , which includes Rs. 9,667 crore on Irrigation and Rs. 4,897 crore on Rural Development. Key financial indicators Budget data is usually presented in tabular form with four key columns: for the current, and for the previous, and Actuals for the before that. Thus, each table presents information for the current and the previous two s. Revenue v/s Capital account One way to analyze the budget is to look at the revenue and capital account. Table 1 presents this information. (Please read Box I & II for an explanation of the technical terms used in the table). Box I: How are receipts and expenditure classified? In the table below, receipts have been classified as revenue and capital receipts. Receipts from sources such as taxation, dividends from companies owned by the government and user charges on public services are classified as revenue receipts. Receipts from sources such as borrowing and disinvestment of public sector companies are classified as capital receipts. Capital receipts reduce assets or increase liabilities. Analyst: Karan Malik Coordinator: Anil Nair ) March 28, 2012 Centre for Policy Research Dharma Marg Chanakyapuri New Delhi Tel: (011) , (011) , Fax:
2 Expenditure has been categorized as revenue and capital expenditure. Capital expenditure is used to create assets or to reduce liabilities e.g. building a road, repaying a loan. Revenue expenditure is used on items such as salaries and administrative expenses. Box II: What is revenue deficit/ surplus? A revenue deficit is incurred when the government s revenue expenditure exceeds its revenue receipts. This implies that the government is dis-saving. It means that the government will have to borrow not only to finance its investment but also its consumption. This will lead to an increase in debt and interest liabilities, and could force the government, eventually, to cut expenditure. In case receipts exceed expenditure, the government generates a revenue surplus. Table 1: Analysis of revenue and capital account (Rs. Crore) Actuals ( ) Total Receipts (a +b) 54,250 64,098 68,592 77,072 12% Total Revenue Receipts (a) 45,928 52,287 56,121 63,147 13% Total Capital Receipts (b) 8,322 11,811 12,471 13,925 12% Total Expenditure (c + d) 53,703 63,999 68,530 76,675 12% Total Revenue Expenditure (c) 44,873 51,935 55,678 62,219 12% Total Capital Expenditure (d) 8,830 12,064 12,852 14,456 12% Revenue Surplus (Total Rev. Receipts Total Rev. Exp.) 1, % - In the previous, the government had estimated a surplus of Rs. 352 crore. However, revised estimates indicate that a surplus of Rs. 443 crore may be generated. In , the surplus is estimated to increase to Rs. 927 crore, an increase of 109% over the revised estimates for In the coming, the government has earmarked Rs. 14,456 crore (or 19% of total expenditure) as capital expenditure. This is same as the percentage earmarked last. Break-up of receipts and expenditure Table 2 gives a break-up of receipts by source. It also splits expenditure into Plan and Non-plan. Box III: How else is expenditure classified? Government expenditure is also classified as Plan and Non-plan. Plan expenditure covers expenditure on schemes and projects covered by the five- Plans. Non-plan expenditure is expenditure not covered by the Plans and includes items such as interest payments on government debt, expenditure on police, and even maintenance of existing government establishments such as schools and hospitals. Box IV: What is fiscal deficit? Fiscal Deficit = (Total receipts excluding borrowing) - Total expenditure The excess of total government expenditure over total receipts is called the fiscal deficit. It is an indication of the total borrowings needed by the government. Fiscal deficit may occur either due to a revenue deficit and/ or due to some capital expenditure undertaken by the government.
3 Table 2: Budget at a glance (Rs. Crore) Receipts Actuals ( ) Total Receipts (a + b) 54,250 64,098 68,592 77,072 12% Total Revenue Receipts (a) 45,928 52,287 56,121 63,147 13% Tax Revenue 20,758 21,349 24,227 26,832 11% Non Tax Revenue 6,294 6,438 8,658 8,951 3% Share of Central Taxes 12,856 15,444 14,977 17,707 18% Grants-in-aid 6,020 9,056 8,259 9,657 17% Total Capital Receipts (b) 8,322 11,811 12,471 13,925 12% Borrowings and other liabilities 7,990 11,637 11,240 13,766 22% Recoveries of Loans , % Miscellaneous % Expenditure Total Expenditure (c +d + e) 53,703 63,999 68,530 76,675 12% Total non-plan expenditure (c) 39,531 44,713 45,734 52,847 16% Total plan expenditure (d) 12,059 16,587 20,167 20,987 4% Centrally Sponsored Schemes (e) 2,113 2,699 2,629 2,842 8% Fiscal Deficit -4,126-8,063-7,687-8,651 13% Fiscal Deficit (% of State GDP) 2.19% 2.09% 2.14% - Revised estimates indicate that the government bettered its fiscal deficit target by Rs. 376 crore. For , fiscal deficit as a percentage of state GDP is now estimated at 2.09%. This is in line with the targets laid down under the Rajasthan Fiscal Responsibility and Budget Management (FRBM) Act, Under this Act, the state government was required to bring the fiscal deficit below 3% of state GDP by As a percentage of state GDP, fiscal deficit is estimated to be 2.14% in In the case of Rajasthan, state taxes contribute the maximum to the state exchequer. In , these taxes are estimated to contribute Rs. 26,832 crore or 42% of the total revenue receipts. - Borrowings and other liabilities continue to remain the main source of capital receipts; Rs. 13,766 crore is estimated to be borrowed in This consists of Rs. 11,229 crore of internal debt, 1,261 crore as loans from the central government and Rs. 1,276 from the public account. - It is estimated that Rs. 52,847 crore (69% of total expenditure) will be spent on non-plan items in As explained above, non-plan expenditure includes items such as interest payments on government debt, expenditure on police, and even maintenance of existing government establishments such as schools and hospitals.
4 Debt position When a government spends more than it collects by way of revenue, it incurs a deficit. The Rajasthan FRBM Act, 2005 is a measure to regulate the build up of debt. It does so by setting upper limits on state revenue and fiscal deficits. Under the Act, the state is required to restrict its total outstanding liability to 39.3% of state GDP in and 38.3% in Table 3: Debt position and interest payments Total Outstanding Liability (% of State GDP) 29.08% 29.06% 28.65% Interest Payments (Rs. crore) 8,012 7,890 8,316 - The total outstanding liability of the state for is estimated to equal 29.06% of state GDP. In , this is estimated to reduce to 28.65%. - In , Rs. 8,316 crore or 13% of total revenue receipts will go towards interest payments. Revenue analysis Of the various sources of revenue, tax revenue or revenue raised by levying taxes (both central and state) is an important source. Table 4 below presents a break-up of this figure. Table 4: Tax revenue (arranged in descending order; in Rs. Crore) Total Tax Collection 36,793 39,204 44,539 14% Share in Central Taxes 15,444 14,977 17,707 18% Corporation Tax 6,240 5,895 6,470 10% Income Tax 3,069 2,994 3,500 17% Customs duty 2,615 2,597 3,220 24% Service Tax 1,515 1,788 2,290 28% Union Excise Duties 1,994 1,680 2,205 31% Other Taxes % State Tax Revenue 21,349 24,227 26,832 11% Sales Tax 13,490 15,000 16,550 10% State Excise 2,623 2,950 3,250 10% Stamps and Registration 1,900 2,500 2,800 12% Tax on Vehicles 1,650 1,725 1,900 10% Electricity Duty 847 1,245 1,505 21% Other Taxes and Duties % - Tax revenue is estimated to equal Rs. 44,539 crore in , an increase of 14% over last. - Of the state taxes, sales tax is estimated to contribute Rs. 16,550 crore, followed by state excise at Rs. 3,250 crore.
5 Expenditure analysis One of the largest line items in most budgets is the expenditure on general services. General services include items such as administrative expenses, pensions and interest payments. In , the revenue expenditure on general services is estimated to be Rs. 20,492 crore (or 33% of the total revenue expenditure of the government). Of this, Rs. 6,839 crore will be spent on pensions and retirement benefits, and Rs. 8,315 crore on interest payments. The above observations highlight some important expenditure items in the budget. A more comprehensive sectoral analysis can help understand state priorities. Tables 5 presents the budgeted expenditure on different areas: Table 5: Budgeted expenditure (arranged in descending order; in Rs. Crore) General Services 19,324 19,662 20,872 6% Social Services 23,842 25,870 28,858 12% Education, Sports, Arts & Culture 11,512 12,349 14,148 15% Water, Sanitation, Housing, Urban Development 5,696 5,489 6,196 13% Medical,Health & Family Welfare 3,158 3,660 3,869 6% Social Welfare & Nutrition 2,557 NA NA Welfare of SC/ ST & Backward 502 NA NA Labour Welfare 110 NA NA Others % Economic Services 17,319 18,414 22,178 20% Irrigation, Flood control & Energy 6,966 7,753 9,667 25% Rural Development 4,109 4,163 4,897 18% Agriculture & Allied Services 2,522 3,058 3,416 12% Transport 1,937 2,411 2,866 19% General Economic Services 1, ,006 42% Industries &Minerals % Science, Technology & Environment % - The government is estimated to spend Rs. 22,178 crore on Economic Services in , which includes Rs. 9,667 crore on Irrigation and Rs. 4,897 crore on Rural Development. - In , Social Services is estimated to receive an allocation of Rs. 28,858 crore. This includes an allocation of Rs. 14,148 crore to Education, Sports, Arts and Culture. - Among the larger sectors, the highest increase in allocation is seen in General Economic Services, Irrigation, Transport and Rural Development. DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of ( PRS ). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.