Ahmedabad, June 10,2023: In a recent study titled ‘State Finances: A Study of Budgets of 2022-23’, the Reserve Bank of India (RBI) forecast a decrease in the collective state debt as a percentage of the GDP, predicting it to fall to 29.5 per cent in 2022-23, from 31.1 per cent in 2020-21.
However, with the 2024 general elections looming on the horizon and state governments pushing for populist schemes, there’s a growing concern that this debt might escalate to uncontrollable proportions.
Gujarat is now facing the specter of rising public debt, with the figure jumping to Rs 3.40 lakh crore, a significant rise from Rs 3.20 lakh crore as of March last year. This escalating debt, coupled with declining revenues, has ignited worry among opposition leaders and local experts.
The Comptroller and Auditor General (CAG) had previously cautioned Gujarat against its rising public debt, highlighting the risk of a potential debt trap. These alarming statistics were revealed by the government while presenting the state’s annual budget on February 28, 2023.
Atman Shah, an economics professor at St. Xavier’s College, told IANS: “At face value, Gujarat’s fiscal deficit does not seem excessive. However, it’s important to discern whether this is due to genuinely low deficit or a low-income base,
“We also need to evaluate whether government expenditure for the vulnerable sector is being sufficiently met. A low fiscal deficit is commendable, but the reasons behind it are even more significant.”
Earlier, the projected public debt for Gujarat was pegged at Rs 3,50,000 crore. The revised estimate, however, stands at Rs 3,40,000 crore and is forecasted to climb to Rs 3,81,000 crore by next year.
When Gujarat’s Finance Minister Kanubhai Desai, presented the state budget for the fiscal year 2022-23 on March 3, 2022, the fiscal deficit for 2022-23 was targeted at Rs 36,113 crore (1.64 per cent of GSDP). According to the revised estimates for 2021-22, the fiscal deficit was anticipated to be 1.51 of the GSDP, lower than the original estimate of 1.64 of the GSDP.
Despite these concerns, the estimated fiscal deficit for 2022-23 (1.64 of GSDP) remains well within the Central government’s approved limit of 4 per cent of GSDP for the Union Budget 2022-23.
As Gujarat grapples with increasing public debt and concerns over fiscal responsibility, it’s clear that there’s a pressing need to address these issues urgently to safeguard the state’s economic future.