Budget Analysis Haryana Budget 2012-13 The Minister of Finance, Harmonhinder Singh Chattha, presented the General Budget 2012 to the State Assembly on the 5th of March, 2012. In his address, he commented on the fiscal performance of the State in 2011-12 and laid out his budget proposals for 2012-13. 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 Revised estimates indicate that the government is on track with respect to its fiscal deficit targets. Fiscal deficit is estimated to decrease to Rs. 7,597 crore or 2.10% of state GDP in 2012-13. In 2012-13, the government has budgeted Rs. 5,535 crore or 12% of its total expenditure as capital expenditure. This is lower than the 14% capital expenditure budgeted last year. In 2012-13, capital receipts (or receipts from sources such as borrowing and disinvestment of public sector companies) are estimated to equal Rs. 7,381 crore. However, only Rs. 5,535 crore is budgeted to be spent as capital expenditure. This implies that a part of the capital receipts will be spent on the revenue account (i.e. on items of daily functioning and administration). By the end the next financial year, the total liability of the State is estimated to equal 17.31% of state GDP. Haryana s total committed expenditure (interest payments, salaries and pension) amounts to Rs. 20,169 crore or 54% of the total revenue receipts of the government Sales tax is estimated to contribute the greatest to tax collections (Rs. 16,450 crore) followed by state excise, and stamps and registration tax (at Rs. 3,000 crore each). Education is estimated to receive the highest allocation of 8,396 crore in 2012-13, an increase of 20% over last year. Key financial indicators Key financial indicators such as the total revenue generated, expenditure estimated and the envisaged fiscal deficit are presented in the Budget at a glance document. Analyst: Rohit Kumar (rohit@prsindia.org) Coordinator: Anil Nair (anil@prsindia.org, 9871916608) March 05, 2012 Centre for Policy Research Dharma Marg Chanakyapuri New Delhi 110021 Tel: (011) 2410 6720, (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org
Budget data is usually presented in tabular form with four key columns: for this year, and for the previous year, and Actuals for the year before that. Thus, each table presents information from the previous two years. 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. 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, interest payments and administrative expenses. Box II: What is revenue deficit? 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 (2010-11) Total Receipts (a +b) 31,676 39,170 39,911 44,708 14% Total Revenue Receipts (a) 25,564 32,018 33,488 37,328 17% Total Capital Receipts (b) 6,113 7,152 6,424 7,381 3% Total Expenditure (c + d) 33,063 40,277 41,488 45,319 13% Total Revenue Expenditure (c) 28,310 34,679 36,049 39,784 15% Total Capital Expenditure (d) 4,753 5,598 5,439 5,535-1% Revenue Deficit (Total Rev. Receipts Total Rev. Exp.) -2,747-2,661-2,562-2,456 - In 2012-13, the government has budgeted Rs. 5,535 crore or 12% of its total expenditure as capital expenditure. This is lower than the 14% capital expenditure budgeted last year. - In the coming year, capital receipts (or receipts from sources such as borrowing and disinvestment of public sector companies) are estimated to equal Rs. 7,381 crore. However, only Rs. 5,535 crore is budgeted to be spent as capital expenditure. This implies that a part of the capital receipts will be spent on the revenue account (i.e. on items of daily functioning and administration). - The government estimates a decrease in revenue deficit in 2012-13. However, despite the decrease, it will miss the targets prescribed by the Haryana Fiscal Responsibility and Budget Management (FRBM) Act, 2005. Under the FRBM Act, the government was required to
progressively reduce its revenue deficit to zero by 2008-09 and generate revenue surplus thereafter. 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. (Please read Box III & IV for an explanation of the technical terms used in the table). 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-year 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. Table 2: Budget at a glance (Rs. Crore) Receipts Actuals (2010-11) Total Receipts (a + b) 31,676 39,170 39,911 44,708 14% Total Revenue Receipts (a) 25,564 32,018 33,488 37,328 17% Tax Revenue 19,092 22,772 23,781 27,053 19% Non Tax Revenue 6,472 9,246 9,707 10,275 11% Total Capital Receipts (b) 6,113 7,152 6,424 7,381 3% Recoveries of loans 233 233 301 374 61% Misc. Receipts 8 17 17 20 19% Net Borrowings 5,872 6,903 6,105 6,986 1% Expenditure Total Expenditure (c +d) 33,063 40,276 41,488 45,319 13% Total non-plan expenditure (c) 22,428 24,939 26,234 28,769 15% Total plan expenditure (d) 10,635 15,337 15,254 16,549 8% Fiscal Deficit (Total Receipts Total Expenditure excluding borrowing) -7,258-8,009-7,682-7,597 Fiscal Deficit (% of State GDP) 2.70% 2.60% 2.50% 2.10% - Revised estimates indicate that the government is on track with respect to its fiscal deficit targets. Fiscal deficit is estimated to further decrease to Rs. 7,597 crore or 2.10% of state GDP in 2012-13. - In 2012-13, tax revenues are estimated to increase by 19% and non-tax revenues by 11%. Borrowings are expected to remain the main source of capital receipts. An amount of Rs. 6,986 crore is estimated to be borrowed in 2012-13.
- Rs. 28,769 crore (63% of total expenditure) is estimated to be spent on non-plan items in 2012-13. Approximately 99.5% of this expenditure will be spent on the revenue account. As explained above, non-plan expenditure includes items such as interest payments, expenditure on police, and maintenance of existing establishments such as schools and hospitals. Debt position When a government spends more than it collects by way of revenue, it incurs a deficit. The FRBM Act is a measure to regulate the build up of debt. Under the Act, Haryana was required to reduce its total outstanding debt to less than 28% of state GDP by March, 2010. In March, 2010, Haryana s total outstanding liability equalled 20.24%. Table 3: Debt position, interest payment and loan repayment (Rs. Crore) State debt (crore) 52,702 53,132 60,437 15% Outstanding guarantees 3,675 4,000 3,500-5% Total liability (% of State GDP) 18.35% 18.47% 17.31% Repayment of loans 6,666 7,956 9,221 38% Interest payments 4,380 4,345 5,261 20% - Revised estimates indicate that the state paid back loans worth Rs. 7,956 crore last year. This is significantly higher than the budgeted amount of Rs. 6,666 crore. In the coming year, loans worth Rs. 9,221 crore are estimated to be repaid. - By the end of 2012-13, the total liability of the State is estimated to be 17.31% of state GDP. - It is estimated that Rs. 5,261 crore (14.1% of revenue receipts) will go towards interest payments. Revenue analysis Of the various sources of revenue, Tax Revenue or revenue raised by levying taxes is an important source. Table 4 below presents a break-up of the total tax revenue of the state. Table 4: Tax revenue (Rs. Crore) Total Tax Revenue (a + b) 22,772 27,053 19% Share of Central Taxes (a) 2,765 3,180 15% State Tax Collection (b) 20,007 23,873 19% Sales Tax 14,100 16,450 17% State Excise 2,400 3,000 25% Stamps and Registration 2,350 3,000 28% Vehicle Tax 515 750 46% Passenger & Goods Tax 425 450 6% Other Taxes and Duties 217 223 3%
- State taxes are estimated to contribute Rs. 23,873 crore in 2012-13, an increase of 19% over last year. - In the case of Haryana, state taxes contribute the bulk of total tax revenue. Only Rs. 3,180 crore (or 12% of tax revenues) are estimated to come from the centre. - Sales tax is estimated to contribute the greatest to tax collections (Rs. 16,450 crore) followed by state excise, and stamps and registration tax (at Rs. 3,000 crore each). - Vehicle tax is expected to see a 46% increase in collections, from Rs. 515 crore last year to Rs. 750 crore this year. Expenditure analysis One of the biggest line items in most budgets is the wage bill i.e. salary expenditure and pensions. In 2012-13, Haryana s salary expenditure is estimated to be Rs. 11,438 crore. The pension payout is estimated to be Rs. 3,470 crore. Taken together, this amounts to an expenditure of Rs. 14,908 crore (or 40% of the total revenue receipts of the government). The total subsidy bill of the government is estimated to be Rs. 4,348 crore in 2012-13, an increase of 13% over the amount budgeted last year. The above observations highlight some important expenditure items in the budget. Another way to analyze government expenditure is to look at it sectorally/ by department. Such an analysis can help understand state priorities. Table 5 below presents this information. Table 5: Budgeted expenditure on major sectors (arranged in decreasing order; in Rs. Crore) Repayment of Loans 6,666 7,956 9,221 38% Education, Sports, Art & Culture 6,995 6,802 8,396 20% Interest Payments 4,380 4,345 5,261 20% Power 4,962 4,743 5,238 6% Pensions 3,250 3,250 3,470 7% Social Welfare 2,807 2,758 2,662-5% Police 1,699 1,748 1,975 16% Irrigation 1,748 2,031 1,967 12% Urban Development 1,695 1,910 1,761 4% Health & Family Welfare 1,444 1,487 1,653 15% Agri. & Allied Services 1,529 1,468 1,637 7% Transport 1,357 1,275 1,514 12% Rural Development Programmes 1,105 1,058 1,207 9% Technical Education 406 576 498 23% Co-operation 211 303 224 6% Industries 120 121 129 8% Others 6,568 7,614 7,727 18% Total expenditure 46,942 49,443 54,540 16% Total expenditure excluding repayment of loans 40,277 41,488 45,319 13%
- Education is estimated to receive the highest allocation of Rs. 8,396 crore in 2012-13, an increase of 20% over last year. - Other sectors such as Technical Education, Police, Health and Family Welfare, Irrigation and Transport are also estimated to see significant increases in allocation. - Allocation to one sector (Social Welfare) is estimated to decrease by 5% in 2012-13. 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.