Assam Budget 2024-25 and the state of economy

 Udayan Hazarika

(The writer can be reached at udayanhazarika@hotmail.com)

 Assam is preparing for the presentation of its budget for the year 2024–25 on February 12, 2024. The Assembly session is already on, and as per the media report, the budget will be people-friendly, as disclosed by the Finance Minister in a meeting. The utilization of the budget provisions in the current year is reportedly not satisfactory due to the resource crunch. The state has nearly 6.00 lakh employees on its payroll, and it requires more than Rs 42,000 crore annually for the payment of salaries, pensions, and wages to its staff. Thus, a major part of its earnings is siphoned off while paying salaries, pensions, and wages.

In the current year, as per the budget provision, the total receipt of the state was estimated at Rs 1.42 lakh crore, of which slightly more than 55 percent has so far been collected. The state was supposed to get Rs 32,000 crore as the state share of Union taxes as approved by the Fifteenth Finance Commission (15th FC), out of which the Centre has so far released 75 percent of the amount. As usual, the Centre will release the remaining installments only during March or even after March, despite the fact that the 15th FC award period will expire by March 2024. Another award of the 15th FC, i.e., a grant-in-aid meant for various authorities of the state amounting to Rs 45,121 crore, is still waiting for its release of as much as 70 percent. However, the GOI, at the most, will release not more than one more dose of this allocation in the current year, resulting in a loss of more than half the amount projected. The receipt position of the state is therefore strenuous. The progress on the capital account front is also far from satisfactory. Our capital receipt comprises borrowing covering 99 percent of the total, leaving only one percent for the amount to be realized from the recovery of loans, etc. Of the total capital receipts of Rs 27,495 crore, so far not even 60 percent could be realized, signifying thereby that only around Rs 15,000 crore has been borrowed of the total of Rs 27,188 crore.

In respect of the utilization of funds, as usual, salary, pension, and wages come first. The total fund allocated in the budget for this purpose was Rs 58,230 crore, and out of this amount, so far, Rs 38792 crore, i.e., 66.62 percent, has been utilized. Of the remaining allocations in the revenue account, which amount to Rs 47,917 crore, so far only about Rs 20,000 crore, or roughly 42 percent of the total, have been spent. Thus, it would be very difficult to cross the 65 percent threshold of the utilization of funds in the current year, as hardly one month remains for the imposition of a model code of conduct for general elections to the Lok Sabha. However, it is very likely that several popular schemes that will continue even after the imposition of a model code of conduct will surely push up the level of utilization by a few thousand crores more. On the capital expenditure front, too, we have a gloomy picture. As of December 23, out of the total allocation of Rs 25785 crore, only about Rs 14,000 crore, or 54 percent, has been utilized. With this, the total expenditure for the current year would come to around Rs 90,000 crore, or 64 percent, roughly as against 1.42 lakh crore.

On the employment front, as per the government report, more than 40,000 government jobs have been filled up this year, and some more advertisements for jobs are also coming up shortly. With this employment scenario, the government sector is showing a dynamic trend, but the private sector is yet to open up to absorbing some more unemployed youths into the economy. For the expansion of private sector employment, the government has to take some initiatives to revamp the MSME units, which are on the verge of closure after the losses made due to the COVID-19 lockdown. According to the Periodic Labour Force Survey, in 2021–22, “Assam’s unemployment rate was 4.9% (as per current weekly status), lower than the national unemployment rate of 6.6%.”.

On the inflation front, the year-on-year inflationary rate as worked out for December 23 comes to 5.33 percent, as against the all-India average of 5.93 percent for rural areas. Similarly, it was 6.56 percent for urban areas as against the all-India rate of 5.46 percent. The combined inflationary rate for Assam thus comes to 5.59 percent against the all-India rate of 5.69 percent. Thus, the overall position of the state in respect of inflation has come to 13th, with the lowest inflationary rate of 2.95 percent in Delhi and the highest inflationary rate of 8.73 percent in Odisha.

The GSDP of Assam was estimated at Rs 2.89 lakh crore in 2022–23 at constant prices and Rs 4.93 lakh crore at current prices. The government has declared that the ultimate effort will be made to enhance the state GDP so as to cross the level of the GDP of Punjab, which is estimated at Rs 4.62 lakh crore for 2022–23. Several states of the country have achieved remarkable progress in terms of GDP growth in 2022–23, both at constant and current prices. Mention may be made of states like Maharashtra, which have maintained their top position in the GSDP. Its 2021–22 GSDP was much higher than any other state’s GSDP in 2022–23. It was Rs 20.28 lakh crore for that year. It is followed by Tamil Nadu with Rs 14.53 lakh crore in 2022–23, Karnataka with Rs 13.26 crore, UP with Rs 13.04 lakh crore, and West Bengal with Rs 08.54 lakh crore.

The state is, however, reeling under tremendous pressure from outstanding debt. The debt burden as of March 31, 2023, was 1.2 lakh crore, which is equivalent to half of the gross state domestic product, which stood at Rs 2.89 lakh crore at constant prices for 2022–23. Even against the GSDP at current prices for 2022–23 of Rs 4.93 lakh crore (BE), this volume of debt comprises as much as 25 percent, and it is still rising. As of February 2024, the outstanding liabilities of the state totaled Rs 1.35 lakh crore. The capacity of a state to repay its debt burden is dependent on its income sources. At this stage of the affair, therefore, the state government needs to be very careful about resorting to market borrowing. Although the state has not yet touched the optimum level of borrowing that is permitted under the Assam Fiscal Responsibility and Budget Management Act 2005, we need to keep in mind that our repayment capacity is limited by our resources. The state depends on the government of India for 73% of our required resources annually. Moreover, the debt is increasing at a rapid rate. If we look at the growth rate of debt for the last seven years, i.e., between 2017-18 and 2023-24, in the important States of India, we may observe that the rate of growth in Andhra Pradesh was 92.92 percent, and in Gujarat it was 57.94 percent, Haryana: 71.74%, Karnataka: 117.58%, Maharastra: 57.32 percent, Punjab: 56.26 percent, Rajasthan: 90.65%, Tamil Nadu: 130.74%, UP: 37.22%, West Bengal is at 63.94%, and Assam is at 188.34%, which is the highest among all the states.

The state is steadily making progress in respect of the payment of interest on its borrowing. As per budget estimates for the current year, the state is to make a payment of Rs 8,813 crore as interest, which has so far repaid 57 percent. However, on account of gross market borrowing of Rs 17,000 crore last year (2022–23), the state could repay only Rs 995 crore, which covers only 05.8 percent of the loan amount. The government should endeavour to put in place a systematic repayment procedure in view of the fact that gross borrowing is picking up. In the current year, the government borrowed Rs 8,250 crore till December 2023, of which no amount has so far been repaid. The other states have also borrowed huge amounts from the market, but their borrowing is effective. For example, in 2022–23, Andhra Pradesh borrowed Rs 57,478 crore, of which 21 percent has been repaid. Similarly, Bihar raised Rs 36,800 crore, of which 25 percent repaid, Gujarat raised Rs 43,000 crore, of which 34 percent repaid, and Haryana raised Rs 45,000 crore, of which 37 percent repaid. Similar is the case with Kerala, Karnataka, Madhya Pradesh, Maharastra, and even Himachal Pradesh.