You are using an older browser version. Please use a supported version for the best MSN experience.

Uttar Pradesh’s fiscal deficit likely to breach 3% target: SBI report

LiveMint logoLiveMint 24-07-2017 Sahib Sharma

Mumbai: Fiscal deficit of Uttar Pradesh is likely to breach the 3% target as mandated by Fiscal Responsibility and Budget Management (FRBM) Act according to State Bank of India (SBI) research report titled ‘A long road to “Uttam Pradesh”’ released on Monday.

The report believes that revenue mobilisation will be lower due to GST effect, which will have further implications on fiscal numbers.

Fiscal deficit is the difference between total expenditure (including interest payments) and total revenue receipts that is met primarily by market borrowings

The government in its annual budget said that it will contain fiscal deficit at 2.97% for the financial year 2017-18, 3 basis points below the threshold required. However in the past two years, the government’s fiscal deficit has surpassed 3% target. It stood at 3.40% and 5.32% for the financial year 2014-15 and 2015-16, respectively.

This year budget has set out Rs36,000 crore on account of farm loan waiver which is going to affect fiscal numbers negatively.

“Total expenditure is budgeted to increase by 13.1% in current fiscal (11.9% as per revised figure and scaled down from 14.1% budgeted figure for last fiscal) and Revenue Receipts at 18.6% in current fiscal (18.6% as per revised figure and scaled down from 24% budgeted figure for last fiscal),” said the report authored by Soumya Kanti Ghosh, group chief economic adviser, SBI.

The report noted that states like Uttar Pradesh, Tamil Nadu, Rajasthan, Punjab, Kerala, Haryana are not eligible for additional market borrowing in the financial year 2018, due to non-compliance of fiscal prudence norms. The only option left with these states is to reduce their expenditure to be in line with the fiscal deficit target of 3% in the current financial year.

The report raised concerns on decline in capital expenditure on various activities. “Thus, a higher fiscal deficit per se is not bad, until and unless it finances productive capital expenditure,” added report.

More From LiveMint

image beaconimage beaconimage beacon