The per capita income in Assam at Rs 67,620 is far lower than the national average of Rs 1,03,870, and to bridge this gap the State economy will have to grow at above double digit rate for at least a decade. To thresh out a strategy as to how to go about it, the 15th Finance Commission visited the State recently. In the course of deliberations during the 2-day visit, it became clear that Assam is yet to recover from the withdrawal of special category status. In a presentation by top State officials, this loss was pegged at around Rs 8,400 crore; it was shown that with no help from the Centre to compensate the loss, the State had to bear additional burden in implementing welfare schemes. Attributing this loss to the abolition of Planning Commission, the Finance Commission chairman NK Singh pointed out that his team’s brief was to study the ‘entire fiscal stability’ of the State. In turn, Chief Minister Sarbananda Sonowal underlined that despite low per capita income and other poor socio-economic indicators, apart from facing challenges like insurgency, Assam got reduced share of central taxes under the recommendations of the 14th Finance Commission. This besides, Assam has not had a happy experience with the Goods and Services Tax (GST) introduced last fiscal; Sonowal pointed out the estimated 15-20 percent loss in collections compared with expected revenue on month to month basis. Since the taxes subsumed under GST formed around 60 percent of the State’s tax revenue, obviously the going has been hard. Significantly, Sonowal claimed that apart from GST, there has been average 20 percent annual increase in last two years in the collection of other State government taxes.
Boosting the economy
To restate, the Finance Commission team’s mandate was to brainstorm with Assam government, political parties and various bodies over structural, administrative and other changes needed to raise more resources and ensure proper utilization. On the eve of its visit, the commission felt there was scope for far better outcomes in the State’s health, educational and economic spheres; particular mention was made of infant mortality rate (IMR) and maternal mortality rate (MMR) in Assam being higher than the national averages, while the State is lagging behind in life expectancy and literacy. In representations made to the commission, trade and industry bodies highlighted obstacles they are facing, while autonomous council representatives spoke about unmet developmental objectives. All stakeholders lobbied for more funds once the commission goes about finalizing its award for the State. Understandably, expectations are high, though these should not be unrealistic. Moping over loss of special status will do no good, even though it is true that the Centre did not put in place a graded system to help weaker States like Assam tide over the loss. But it is also true that successive governments in Assam played fast and loose with funds from the Centre under this head. As of now, even a State with more clout like Andhra Pradesh has little likelihood of regaining special status, though parties like Telugu Desam and YSR Congress are crying themselves hoarse over this demand. While the powers-be in Dispur are eager to secure a better deal from the Finance Commission, the chronically unhealthy state of Assam’s finances calls for a new vision as well as a drastic overhaul in how the State administration functions. The Chief Minister’s claim of improved collection of State taxes is welcome, for it shows that at least some loopholes are being plugged. If only corrupt officials of Excise and other departments can be effectively prevented from aiding tax evasion, the performance will be better still.
The fact that Assam government remains mostly dependent on the Centre’s largesse was once again brought home in a CAG report tabled in the assembly recently. Around 33 percent of revenue receipts during 2016-17 came from the State’s own resources, while the remaining 67 percent came from Central tax transfers and grants-in-aid; salaries and wages alone accounted for 40 percent of those revenue receipts. As for total expenditure by the Assam government from 2012-13 to 2016-17, as much as 90 percent was revenue expenditure; during this period, revenue expenditure went up 69.42 percent. By its very definition, revenue expenditure does not create any assets for the State government or help reduce any liability. The Assam government has been spending under this head on salaries, pensions, providing services and relief on account of natural calamities. Assam’s budget expenditure has also jumped up, as Sonowal pointed out to the Finance Commission, from Rs 42,000 crore to Rs 70,000 in two fiscals (2015-16 to 2017-18). Assam and other NE States have much hopes riding on the Centre’s long-awaited industrial policy for the region, particularly on what it prescribes towards nurturing micro, small and medium enterprises (MSMEs). But Dispur will have to get its act together fast on agriculture and irrigation. It is a shame that these two departments, which can help improve the State’s economy considerably, continue to be afflicted by drift and corruption.