The State Government is confident that it is well positioned to sustain its fiscal performance and overcome any impending challenges in the coming days with the signs of adverse impact of COVID-19 fast receding.
The government is of the view that the imminent stoppage of GST compensation, increased committed expenditure and decreased devolution of funds from the XV Finance Commission are impending challenges that require innovative financial solutions. The government gave a detailed picture of the fiscal performance over the past few years and the reforms that ensured that Telangana was among top performers in the 18 general category States in the Socio Economic Outlook 2022 tabled in the Legislative Assembly on Monday.
According to the SEO, the State’s own tax revenues as a proportion of the GSDP during 2017-20 was highest among the 18 general States in the country. The State’s own revenue during the period accounted for 73.8 per cent of its revenue receipts on average higher than general states at 57.7 per cent. The report claimed that the second wave of Covid-19 in April-June 2021 did not impact the finances as much as the first wave did with almost every revenue stream recording higher numbers than the same period previous year.
The share of development expenditure in total expenditure during the period stood at 77.4 per cent, highest among the general states with the latter’s average share of development expenditure being far lower at 68.2 per cent. The committed expenditure during 2017-20 (inclusive of salaries, wages and interest payments) was 48.7 per cent of the revenue receipts, slightly lower that the average committed expenditure of 49.1 per cent of general states.
The State performed well in terms of outstanding liabilities to GSDP ratio which stood at 22.33 per cent, much less than 27.73 per cent of general states. The State’s own tax revenues constituted 65.18 per cent of revenue receipts which was significantly higher than India general States average of 48.9 per cent reflecting the tax collection efficiency. The average per capita revenue (Rs. 26,393) for the period was second highest while the average value added tax and excise revenue during the period 2017-20 were significantly higher than the general States.
The State witnessed remarkable revenue growth in Registration and Stamps, Excise and SGST and VAT being on the top or much higher than India general states growth rate in these categories. The report said the capital outlay accounted for the biggest share of gross fiscal deficit for the State during 2017-20 while in case of revenue deficit, India general states had an average deficit of 18 per cent accounting for fiscal deficit while Telangana posted a creditable 3 per cent revenue surplus in the same period.
The remaining 27 per cent of the fiscal deficit was accounted for by net lending and a major chunk of these loans and advances were directed to capital expenditure in major irrigation, animal husbandry, housing, water supply and other key sectors.
The government said it was important for debt to be sustainable to ensure that interest payments did not account for significant share of revenues. Accordingly, debt sustainability was being tracked through two key parameters – total outstanding liabilities to GSDP ratio and interest payments to revenue receipts ratio.
Th total outstanding liabilities to GSDP ratio stood at 22.33 per cent during 2017-20 much less than general states average of 27.73 per cent and interest payments to revenue receipts ratio stood at 12.88 per cent lower than the general states average of 13.71 per cent. “Telangana has done well compared to other states in terms of debt sustainability,” the report said.
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