JAMMU: The State Government shifting to Ways and Means Advances (WMA) arrangement with RBI, has saved about Rs 225 crore per year on interest outgo with it liquidating its structural overdraft (OD) liability of Rs. 2965 crore with the J&K Bank.
This was disclosed by Minister for Finance Abdul Rahim Rather after queries raised by some members in the Legislative Assembly that the State has plunged into a debt trap and the fiscal deficit is on rise.
Rather, dispelled these apprehensions and said that, fiscal deficit is on continuous decline. About fiscal consolidation measures the minister said that the State Government WMA system with RBI has proved to be advantageous to the State with it not only saving Rs. 225 crore per year on interest outgo but making an earnings of approximately Rs. 35 crore till now.
Rather added that with WMA, an outright grant of Rs. 1000 crore has flown to the State Government during the year 2010-11 to liquidate the overdraft with J&K Bank. In addition, Rs 1300 crore Open Market Borrowing was allowed to the State Government for liquidation of the overdrafts outside the Fiscal Responsibility and Budget Management (FRBM) arrangements. He said that the WMA arrangment is available to the State Government on ratio-rate fixed by the RBI from time to time, without any other transaction or commission charges by the RBI.
He said fiscal deficit of the State is on continuous decline, adding that as against the target of 4.2%, for the last financial year, it stood at 3.37%. Similarly, the total outstanding debt as a percentage of GSDP for the State stood at 49.67%, which was well below the ceiling of 53.6%, he added. He said that these targets have been prescribed by the FRBM Act.
Rather also presented the year wise figures since 2005-2006 to explain that the fiscal deficit which was alarmingly high at 9.92 % against the target of 5.5% in 2005-2006, has come down to just 3.37% during the last fiscal (2012-13).
He said in 2006-07 and 2007-08 the fiscal deficit was much more than the prescribed targets, adding that it was 6.66% in 2006-07 against a target of 5%, 7.14% against the target of 4.5% in 2007-08 and 7.78% against target of 4% in 2008-09, however after 2009-10, when the present Government initiated various institutional measures in the path of fiscal correction and consolidation, the State’s fiscal deficit came under control and has remained well below the targets at present . In 2010-11 it was only 4.15% against the target of 5.3% and further came down to 4.2% against the target of 4.7% in 2011-12. It further reduced to 3.37% against the target of 4.2% during the last financial year (2012-13). Similarly, he said, the State’s total outstanding debit as a percentage of GSDP has remained within the prescribed limits under FRBM Act since 2010-11, adding that it was 52.6% against the permissible limit of 56% in 2010-11, 51.84% against the limit of 55.1 % in 2011-12 and 49.67% against the limit of 53.6% in 2012-13. He added that these year-wise figures clearly show that the State’s debt percentage was within the permissible limits and it was totally incorrect to say that the State was heading towards a debt trap. The Minister said the State has taken measures like rationalization of tax structure, introduction of new pension scheme, stipendiary mode of recruitment; VAT reforms, to streamline its fiscal management.
The Minister said that on the recommendation of the twelfth Finance Commission, the State passed the FRBM Act in 2006 which has been amended in 2009 to incorporate the recommendations made by the thirteenth Finance Commission. The Act determines the targets for fiscal deficit and other budgetary responsibilities of the Government.