New Delhi/Bhubaneswar: Odisha topped among all states with highest score of 67.8 in the NITI Aayog’s first Fiscal Health Index (FHI) report for 2022-23.
Odisha, Chhattisgarh, Goa, Jharkhand, and Gujarat labelled “Achievers”, were followed by Maharashtra, Uttar Pradesh, Telangana, Madhya Pradesh, and Karnataka, termed as ‘Front runners’, with four states of Tamil Nadu, Rajasthan, Bihar and Haryana as ‘performers’ and bottom four states, Kerala, West Bengal, Andhra Pradesh and Punjab, classified as ‘aspirational’.
Covering 18 major states for the financial year 2022-23, the index assigned a score to each state on the basis of five parameters – quality of expenditure, revenue mobilisation, fiscal prudence, debt index, and debt sustainability.
Odisha, Chhattisgarh, and Jharkhand led on the back of mining-linked premiums, whereas Punjab, Andhra Pradesh, and West Bengal emerged as major laggards across parameters, including revenue mobilisation and fiscal prudence. “Odisha excels in fiscal health with the highest overall index score of 67.8. It tops the Debt Index (99.0) and Debt Sustainability (64.0) rankings with better than average scores under Quality of Expenditure and Revenue Mobilization. The state has maintained low Fiscal Deficits, a good debt profile, and an above average Capital Outlay/GSDP ratio,” the report released on Friday said.
Goa, Telangana and Odisha led in revenue mobilization and fiscal prudence. “In addition, it was observed that Odisha, Jharkhand, Goa, and Chhattisgarh have effectively mobilised non-tax sources. Their Own NonTax Revenue as a percentage of Total Revenue was, on average, at 21%, with Odisha relying heavily on mining-linked premiums and Chhattisgarh benefitting from coal block auctions.”
For Madhya Pradesh, Odisha, Goa, Karnataka, and Uttar Pradesh, the capital expenditure, on average, constituted 27% of the total developmental expenditure.
The report further stated that Odisha, Chhattisgarh, Goa, and Gujarat have consistently been the top-performing states across all time periods considered in the study.
“Odisha is among the few Indian states, complying with the FRBM parameters since 2005, taking prudent measures to keep its fiscal indicators healthy. The state government is aware that its developmental needs require sustained increases in spending on priority sectors like healthcare and education.”
Quality of Expenditure
>> The Revenue Expenditure and Capital Expenditure increased by 53.5% and 42.0% respectively, during 2018-19 to 2022-23.
>> The Capex grew at an average annual rate of 9.2% during the same period. In comparison to the previous year, Capex on education, sports, arts and culture rose due to increase in expenditure under Samagra Shiksha. The increase in urban development was due to increase in expenditure for New City Development. •
>> It was observed that on an average, the Revenue Expenditure on health and education by Odisha (CAGR 33.8%) was higher than that of the major states (CAGR 22.6%) during 2020-2022.
Revenue Mobilization
>> The ratio of State’s Own Non-Tax Revenue to GSDP witnessed an increase from 2.9% in 2018-19 to 5.6% in 2022-23.
>> About 90% of the State’s Own Non-Tax Revenue and 45% of the State’s Own Revenue Receipts stem from the mining sector with premiums linked to market prices over the lease period, rather than increased extraction14,15.
>> As opposed to 2021-22, there was a decrease in the revenue from mining sector in 2022-23, due to a rise in the prices of iron-ore.
>> In 2022-23, the Own Tax Revenue increased by 14.3% over previous year. The major increase was under (i) receipts under State GST (attributed to resumption of business activities to full strength and healthy economic recovery) (ii) Taxes on Sales, Trade, etc. (iii) State Excise.
Fiscal Prudence
>> Prudence in expenditure and efforts to mobilise own revenue have reduced the Fiscal Deficit from 6.9% of GSDP in 2000-01 to a 2% in 2022-23 which is within the limit of 3% set by FRBM.
>> The State has been able to attain a Revenue Surplus since 2005-06. This creation of fiscal space enabled the state government to invest more in socio-economic sectors and critical areas of the economy. Debt Index & Debt Sustainability
>> Since 2019-20 the total debt of the State has been decreasing mainly due to the repayment of market loans. The Outstanding Liabilities/GSDP between 2018-19 to 2022-23 ranged between ~15%-24%, within the target of 25% set by FRBM.
>> In the last five financial years (i.e., 2018-19 to 2022-23), the State had a Primary Deficit, except for the year 2021-22. However, debt sustainability has been positive in last few years, except in 2020-21.
