Note: Data includes all 28 states, Delhi, erstwhile state of Jammu and Kashmir, and Puducherry. RBI has noted that these contingent liabilities are a risk to state governments owing to the large outstanding debt and losses of SPSEs. With no hope that the federal government will plug the states’ $112 billion budget hole this year, the “politically realistic” options are all bad. States mainly raise revenue by. Due to alcohol prohibition in place in Bihar and Gujarat, revenue from excise duty is nearly zero. :  GST compensation grants expected by states for 2018-19 and 2019-20 (in Rs crore), The Finance Commission recommends the share of states in the divisible pool of central tax revenue. After 2022, states receiving compensation will have a revenue gap as they will not get these funds. Own resources of states have undergone a major shift since 2017 with the implementation of GST, under which states transferred a major part of their taxation powers to the GST Council. In 2017, FRBM review committee (Chair: Mr. N. K. Singh) had recommended that a debt to GDP ratio of 60% should be targeted for the entire country, with a 40% limit for the centre and 20% limit for the states. Note: Data of Arunachal Pradesh is that of three years (2017-20). The Act guarantees states a 14% annual growth on their base year revenue, i.e., the revenue generated by states in 2015-16 through levy of taxes which were subsumed under GST. This is mainly due to a lower portion of revenue receipts being spent on salaries and wages. If Montana voters approve the ballot initiatives that legalize recreational marijuana this November, it could raise between $43.4 and $52 million dollars in tax revenue for the state. It also requires states to bring out statements on fiscal policy for greater transparency. Huge underspending could imply that states are being unable to meet their development targets in specific sectors. In 2019-20, the central government has estimated an expenditure of Rs 4,31,011 crore on defence and Rs 80,599 crore on internal security (central armed police forces, intelligence bureau, and border infrastructure). The budget allocation for this scheme in 2019-20 is Rs 75,000 crore. In the United States, tax revenue is collected at each governmental level through federal, state and local taxes. :  Increasing compensation requirements vis-a-vis cess collections. State. States raise 9% less revenue than budgeted, higher shortfall in grants-in-aid from the centre. While these taxes were completely under the control of each state, GST rates are now decided by the GST Council. Between 2015-16 and 2017-18, states on aggregate saw a 10% average increase in the fiscal deficit as compared to the estimates they had made during the budget (by 0.3% of GSDP). In comparison, the cutback in revenue expenditure was 7%. During the 2015-18 period, the spending on capital outlay by states was 14% less than what they budgeted. This includes expenditure on schemes such as the National Health Mission, construction and maintenance of hospitals, and payment of salaries and pensions to hospital staff. With 2019-20 being the last year of the 14th Finance Commission period, the Terms of Reference of the 15th Finance Commission and its recommendations will direct a major share of states’ revenue (35% during 2015-20) during the six-year period 2020-26. Direct taxes include taxes on income and property whereas indirect taxes include taxes on commodities and services. In another instance, the off-budget borrowings undertaken by the Indian Railway Finance Corporation (to finance railway projects) and the Power Finance Corporation (to finance power projects) amounted to Rs 3.05 lakh crore at the end of 2016-17. : Arunachal Pradesh spends the highest on roads and bridges, : Telangana spends the highest on irrigation and flood control, : Jammu and Kashmir spends the highest on energy, : Jharkhand and Bihar spend the highest on rural development, : Arunachal Pradesh spends the highest on water supply and sanitation, : Gujarat spends the highest on urban development, : Chhattisgarh spends the highest on agriculture and allied activities, : Delhi spends the highest on health and family welfare, : Madhya Pradesh spends the highest on housing, : Telangana spends the highest on welfare of SC, ST and OBC, : Andhra Pradesh spends the highest on social security, http://www.cga.nic.in/MonthlyReport/Published/10/2019-2020.aspx, http://www.cga.nic.in/MonthlyReport/Published/3/2018-2019.aspx, http://egazette.nic.in/WriteReadData/2017/180483.pdf, http://www.egazette.nic.in/WriteReadData/2019/214410.pdf, https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/STATEFINANCE201920E15C4A9A916D4F4B8BF01608933FF0BB.PDF, http://164.100.47.190/loksabhaquestions/annex/15/AU1104.pdf, https://rbidocs.rbi.org.in/rdocs//PublicationReport/Pdfs/WGREPORT101A17FBDC144237BD114BF2D01FF9C9.PDF, https://pib.gov.in/newsite/PrintRelease.aspx?relid=130262, https://www.uday.gov.in/acs_arr_india.php, https://dea.gov.in/sites/default/files/Volume%201%20FRBM%20Review%20Committee%20Report.pdf, https://dea.gov.in/sites/default/files/Status%20Paper%20on%20Govt%20Debt%20%20for%202017-18.pdf, https://fincomindia.nic.in/ShowContentOne.aspx?id=9&Section=1, https://cag.gov.in/sites/default/files/audit_report_files/Report_No_2_of_2019_State_Finance_Government_of_Karnataka.pdf, https://cag.gov.in/sites/default/files/audit_report_files/Report_No_20_of_2018_Compliance_of_the_Fiscal_Responsibility_and_Budget_Management_Act_2003_Department_of_Economic_Affairs_Minis.pdf, Женщина нежно лижет анус приятного мужика, Girls equipped with big asses ready to get fucked hard. [7] Report of the Internal Working Group to Review Agricultural Credit, Reserve Bank of India, September 13, 2019,  https://rbidocs.rbi.org.in/rdocs//PublicationReport/Pdfs/WGREPORT101A17FBDC144237BD114BF2D01FF9C9.PDF. During the 13th Finance Commission Period (2010-15), the share of devolution of central taxes, and grants-in-aid from the centre in the revenue receipts of the states was at 22% and 17%, respectively. States which ended up spending significantly less than what they budgeted include Jammu and Kashmir (51%), Assam (51%), and Goa (50%). Sales tax/VAT and excise duty mainly come from these taxes on petroleum products and alcohol (these two products are not part of the GST system). A lower growth rate of central GST revenue would affect the share each state gets out of this pool. However, as borrowings are constrained by FRBM limits, capital outlay being financed out of these borrowings could get adversely affected. During the 2015-20 period, 21% of the total expenditure of states has been met through borrowings. In November 2015, the central government launched the Ujwal Discom Assurance Yojana (UDAY) to improve the financial as well as operational situation of state-owned power distribution companies (discoms). In 2018, CAG reviewed the off-budget financing by the central government. [16], The CAG (2018) recommended that the central government should formulate a policy framework, which should include disclosure to Parliament, among other things. As the war lasted for nearly the entire existence of the Confederacy, military considerations dominated national finance. Energy sector witnessed higher actual expenditure than budgeted due to the implementation of UDAY between 2015-2017 by certain states. Figure 31: Average revenue balance (as percentage of GSDP) during 13th and 14th FC periods. SURVEY . This underspending can be attributed to a shortfall in revenue collection of states. States such as Punjab (38%), Uttarakhand (37%), and Assam (33%) have grown at a higher rate in comparison to others (Figure 15). Delhi has the lowest outstanding liabilities among all states (0.8% at the end of 2019-20). In this context, we look at recent developments that affect state finances and the trends in various components of state finances, i.e., receipts, expenditure, debt, and deficit. In 2019-20, states’ compensation requirement is estimated to be Rs 1,01,200 crore. Figure 14: Growth rate of own tax revenue in comparison to growth in GSDP (2015-20), Own non-tax revenue grows faster than GSDP for 14 states. After SGST, the sales tax/VAT (23%), and the state’s excise duty (13%) are among the largest sources of revenue for the states. 30 seconds . Typically, banks and cooperatives waive off the pending loans of beneficiary farmers on receiving guarantees from the state. These include Odisha (8%), Haryana (6%), Himachal Pradesh (5%), and Karnataka (2%). During the 14th FC period, the revenue surplus is high in the case of some north-eastern states such as Sikkim and Mizoram, and hill states such as Jammu and Kashmir. In 2015, the 14th Finance Commission noted that the holding of idle cash balances from borrowed funds increases the interest cost burden for state governments. [15], In 2018, CAG reviewed the off-budget financing by the central government. Our data is 2018 state tax revenues for all 50 states by category as reported by the United States Census Bureau ’s Annual Survey of State Government Tax Collections. Download the excel file for historical rates for each state. The share of capital receipts other than borrowings in meeting expenditure of the states is small (4%). States such as Jammu and Kashmir, Mizoram, and Tripura are estimated to receive more than 50% of their own tax revenue from SGST in 2019-20. In November 2015, the central government launched the Ujwal Discom Assurance Yojana (UDAY) to improve the financial as well as operational situation of state-owned power distribution companies (discoms). 15 states took over debt of their discoms which added about Rs 2.1 lakh crore to their outstanding debt. States require borrowings to fund the shortfall in own receipts as compared to its spending requirements. Figure 41: Jharkhand and Bihar spend the highest on rural development. Expenditure under this head includes subsidy to consumers, allocation for power projects, and assistance to discoms under UDAY scheme in certain states. As the actual GSDP figures could be different, states may end up borrowing above the budgeted fiscal deficit to GSDP ratio. Residential and commercial real estate are often a source of local tax revenue, while personal property taxes are often a source of state tax revenue.In fiscal year 2010, New Hampshire was th… Among these states, six states have estimated the fiscal deficit to be within 0.25% margin from the 3% limit. Most sectors also witness underspending; higher than budgeted expenditure on energy. High growth rate of Assam is due to an increase in non-tax revenue from petroleum and other sources. With the introduction of GST, many indirect taxes levied by the states have been replaced. During the 2015-20 period, states on an average have spent 1.4% of the budget on the housing sector. Arunachal Pradesh is not shown in the figure as data is not available for all years. Fiscal Responsibility and Budget Management Framework relates to laws passed by states for institutionalizing financial discipline. Q. This could occur in the year 2019-20 itself, as the growth of cess collections so far has been much lower than expected for the year (i.e., 1.5% growth witnessed during the seven-month period April to October 2019 vis-a-vis 21% growth budgeted for the complete year). The size of the expenditure budget of states has increased over the years owing to revenue augmentation by the states as well as increased devolution from the centre. These are expenditure obligations which are difficult to reduce during the year. Note: Data of Telangana for the period 2010-15 is that of one year (2014-15). During this period, committed expenditure items comprising salaries, pensions, and interest payments have formed 53% of the revenue expenditure. [3]   In October 2019, the 15th Finance Commission’s period was extended by one year to also include the financial year 2025-26. Elimination of revenue deficit grants would increase the borrowings requirement of these states. While these taxes were completely under the control of each state, GST rates are now decided by the GST Council. Punjab (23%), Haryana (20%), and West Bengal (19%) are some of the states which are estimated to spend a higher portion of their revenue receipts on interest payments in 2019-20. Average underspending on revenue expenditure during this period is 7%. In 14 states, own non-tax revenue has grown at a higher rate than their GSDP. Note that all such guarantees, whether explicit or implicit, are contingent liabilities which states may have to honour if the government bodies default in their repayments. Table 2:  Farm loan waivers announced by states since 2014-15 (figures in Rs crore). Intergovernmental transfers to state governments—primarily from the federal government—totaled $637 billion in 2016. Figure 4:  Possible increase in states’ revenue if cess and surcharge were in the divisible pool (2019-20). In 2019-20, cess collections have so far seen a growth of 1.5% during the seven-month period April to October 2019, which is much lower than the 21% growth budgeted for the year. The growth rate of own tax revenue vis-à-vis the GSDP growth rate shows how the ability of a state to generate tax revenue on its own changes as its economy grows. For instance, in 2018-19, the GST revenue of the central government was Rs 1.6 lakh crore (22%) lower (as per provisional actuals) than the estimate made in the budget. Receipts indicate the money received by the government. Similar income support schemes have been announced by various state governments providing direct cash transfer to beneficiaries. Other notable states having high revenue surplus are Bihar (2.9% of GSDP) and Odisha (2.8% of GSDP). Table 3 provides an illustrative list of such schemes announced by various state governments during recent years. SGST is the largest source of own tax revenue for states. In 2017, the FRBM Review Committee (Chair: Mr.  N. K. Singh) observed that there is a growing trend of off-budget public spending by states. During the 2015-20 period, states on an average have spent 4.1% of their budget on irrigation and flood control. Warren claims the wealth tax would raise $3.75 trillion over the next decade, but critics point to economic and constitutional challenges. More precisely, Biden proposes to raise personal income taxes on unmarried individuals and married couples with taxable income exceeding $400,000, and he also proposes to raise payroll taxes on workers with earnings exceeding $400,000. The Working Group recommended that: (i) loan waivers should be avoided, and (ii) the central and state governments should undertake a holistic review of agricultural policies and input subsidies in order to improve the overall viability and sustainability of agriculture. Figure 37: Outstanding government guarantee as a percentage of GSDP at the end of 2017-18. On the other hand, states which are already expecting relatively higher fiscal deficit due to other requirements may find it difficult to accommodate the additional expenditure due to loan waiver. Note that as per the Article 293 (3) of the Constitution, state governments require permission of the central government to raise any loan if there is still outstanding loan or guarantee that the central government has given to the state. At the end of 2019-20, the outstanding liabilities of states on aggregate is estimated to be 24.6% of their GSDP. Table 1 below shows the compensation grants estimated by states for the years 2018-19 and 2019-20. In 2016-17, the liabilities of FCI on account of loans for subsidy arrears of previous years stood at Rs 81,303 crore. [1] Monthly Data on the Union Government Accounts for the month of October 2019, Controller General of Accounts, Ministry of Finance, as accessed on December 24,  2019,  http://www.cga.nic.in/MonthlyReport/Published/10/2019-2020.aspx. In 2019-20, states are expected to spend 64% more than the central government, a significant change from 46% in 2014-15. Note: Meghalaya is not included in the figure as the SGST numbers are not given in the budget document. Figure 40: Jammu and Kashmir spends the highest on energy. Central transfers consist of share in central taxes (28%), and grants-in-aid from the centre (19%). States spend 63% of its budget on developmental purposes. During this period, Nagaland has spent the highest on administration and security of citizens (17%). For instance, if the 14th Finance Commission had recommended the funding of this entire expenditure out of the divisible pool, devolution to states would have been lower by 7% of their 2019-20 revenue. The decline in the revenue receipts of the states is mostly driven by the decline in own tax revenue. Conversely, a revenue surplus indicates that the revenue sources of states are sufficient to meet their revenue expenditure requirements in a given year. States also typically use brackets, but they tend to be much lower than the brackets for the Federal Government. most states have legislatures with a small upper house and a large lower house, sanitation standards are a part of a states responsibility to protect. During the 2015-20 period, states on an average have spent 6% of their budget on rural development. Capital outlay is the component of government’s expenditure which leads to creation of assets such as roads and bridges, schools, and hospitals. A developmental expenditure helps in increasing the production and productivity of a state’s economy. Therefore, the central government is not required to share with states the revenue it gets from cesses and surcharges. Spending of states such as Karnataka, Madhya Pradesh, Uttar Pradesh, and Bihar on committed expenditure is lower than the average. Note: The above chart does not include Delhi, as data is not available for 2017-18. Note that the finances of discoms are dependent on electricity tariffs. Suffice to say that Edo is also an oil producing state with a GDP of $11.88 billion and a per capita of $3.623. Expenditure on these sectors leads to the creation of infrastructure in the state, the benefits of which accrue to the state over the long term. Note: Data for states does not include Arunachal Pradesh, Meghalaya, Manipur, and Puducherry. For instance, during the 2013-18 period, states such as Sikkim (47%), Bihar (44%), and Meghalaya (39%) have seen a significant growth in the guarantee given by the state. A higher ratio indicates a better ability to harvest taxes from the economic activities in the state. For example, California tax brackets for 2017 start at just 1 percent and max out at 13.3 percent. Debt takeover from discoms under UDAY (Rs 2.1 lakh crore) is one such example of contingent liability. As per the recommendations of the 14th Finance Commission, the share of states in union taxes was increased from 32% to 42% for the 2015-20 period. Figure 26: Spending on human development as a percentage of total expenditure (2015-20), States spend 28% of its budget on economic development. Note:  Due to non-uniform reporting of compensation grants in budgets, there may be other states as well that might require such grants. Note:  Expenditure does not include debt repayment. Also, states have been guaranteed compensation only for a period of five years, which will end in 2022. State governments guarantee the borrowings of State Public Sector Enterprises (SPSEs) from financial institutions. In 2017, FRBM review committee (Chair: Mr. N. K. Singh) had recommended that a debt to GDP ratio of 60% should be targeted for the entire country, with a 40% limit for the centre and 20% limit for the states. The United States gets 98 percent of government revenue from non-tariff sources. A financial assistance of Rs 25,000 over five agricultural seasons to small and marginal farmers, sharecroppers and agricultural landless. Generally, local tax revenues are collected through rates and … In 2015, the 14th Finance Commission recommended that states maintain their fiscal deficit within 3% of their GSDP. 19 states are expected to cross the 25% limit at the end of 2019-20. (iii) sharing in taxe Off-budget mechanisms of borrowing allow the government to bypass legislative approval for expenditure as it remains outside budgetary control. Typically, these limits are set at 25% of GSDP in a year. collecting taxes from other states. During the 2015-20 period, states on an average have spent 3.1% of their budget on urban development. [11]  In 2019-20, 24 states have estimated their outstanding liabilities to be greater than 20% of GSDP. It is devolved to the state as per the criteria recommended by the Finance Commission. It consists of: (i) the money earned by selling assets such as shares of public enterprises, and (ii) the money received in the form of borrowings or repayment of loans. Figure 21: Composition of expenditure of states during the 2015-20 period, States spend 50% of its revenue receipts on committed expenditure items. For instance, Bihar enforced alcohol prohibition from April 1, 2016. Such a scenario would have required states to undertake cuts in their spending and compensate for this shortfall in their receipts. Primary deficit equals fiscal deficit minus interest payments. Major sources of financing of the fiscal deficit of the states are market borrowings, loans from financial institutions, and loans from the centre. During the 2015-20 period, states on an average have spent 6.5% of their budget on agriculture. Yes. The Tax Cuts and Jobs Act (TCJA), enacted at the end of 2017, moved the federal tax code in the opposite direction, reducing revenue by $1.9 trillion over a decade, opening new loopholes, and providing its most significant benefits to the well-off. It suggested that the fiscal deficit limit should be relaxed to a maximum of 3.5% if states were able to contain their debt and interest payments to specified levels. Through these entities, states are providing services such as drinking water, schools, hospitals, and housing for the poor. However, some information is available about off-budget borrowings through audit reports and estimates by Comptroller and Auditor General of India (CAG). Note: High growth rate of own non-tax revenue of Punjab and Uttarakhand is mainly due to a sharp increase in estimates of revenue from general services in 2019-20. In another instance, the off-budget borrowings undertaken by the Indian Railway Finance Corporation (to finance railway projects) and the Power Finance Corporation (to finance power projects) amounted to Rs 3.05 lakh crore at the end of 2016-17. Figure 17: Category wise shortfall in revenue receipts of states as compared to BE (2015-18), Figure 18: Shortfall in revenue receipts of states (2015-18), States finance 75% of their expenditure through revenue receipts; 21% from borrowings. Jammu and Kashmir (42%), Nagaland (42%), and West Bengal (42%) are some other states which have been spending a higher proportion of their revenue receipts on debt servicing. Most of it is paid either through income taxes or payroll taxes. This indicates the gap between the government’s expenditure requirements and its receipts, not taking into the account the expenditure incurred on interest payments on loans taken during the previous years. Voted expenditure consists of all expenditure other than charged expenditure. Fiscal deficit is the gap between the government’s expenditure requirements and its receipts. Note:  2017-18 data corresponds to eight months of GST. Consequently, states have limited autonomy on a large part of its own tax revenue as the receipts from SGST depend on tax rates decided by the GST Council. Further, while the central government’s GST revenue is estimated to grow at a rate of 13.6% in 2019-20 (as per the provisional actual figures for 2018-19), the actual growth could differ from the budget estimates. Such difference in growth rates could lead to a scenario in the future where the cess collections may not be sufficient for the compensation requirements of states. On the other hand, states under-budgeted their expenditure requirements on energy by 14%. As a result, outstanding dues of discoms have risen sharply in the recent period, after registering decline immediately post UDAY. Sources: Union and State Budget Documents; PRS. This document has been prepared without regard to the objectives or opinions of those who may receive it. For instance, this can be done when there is a shortfall of money in the Fund for providing compensation to states. farm loan waivers and UDAY) are leading to states cutting their planned expenditure. Cess and surcharge:  The 15th Finance Commission’s Terms of Reference require it to recommend the share of centre and states in the divisible pool, which is made up of net proceeds of taxes required to be, or which may be, divided between them as per the Constitution. Comparing budget estimates with the actual expenditure for three years (2015-18) shows that on average, states underspend their budget by 8%. Figure 16: Share of key taxes in own tax revenue in per cent (2019-20). This includes expenditure on schemes (such as the Sarva Shiksha Abhiyan and the Midday Meal scheme), construction and maintenance of school buildings, and payment of salaries and pensions of teaching and other staff. During this period, states made optimistic revenue projections and witnessed an average shortfall of 9% in their revenue collection (Figure 18). Property taxes were the most prominent source of state and local tax revenues in fiscal year 2010. States such as Jammu and Kashmir, Mizoram, and Tripura are estimated to receive more than 50% of their own tax revenue from SGST in 2019-20. This means that it may be easier for states whose lower fiscal deficit levels give them enough fiscal space to implement loan waivers without crossing the limits specified under the FRBM Act. Among major sectors on which state governments spend, welfare of SC, ST and OBC sector has witnessed the highest underspending (18%) during the 2015-18 period (Figure 30). Note that the 14% annual growth rate assured under the Act is higher than the year-on-year nominal GDP growth as estimated by the central government (11.5%) and most states for the year 2019-20. Developmental expenditure consists of: (i) social services, which includes expenditure on education, health, water supply and sanitation, housing, urban development, and welfare of backward communities, and (ii) economic services, which includes expenditure on agriculture and allied activities, rural development, irrigation, energy, and transportation infrastructure. Revenue expenditure is the expenditure by the government which does not impact its assets or liabilities. The FRBM Acts of states usually specify limits on the outstanding liabilities as a percentage of GSDP. This consists of 3.3% of the budget on capital outlay, and 1.3% of the budget on revenue expenditure. A revenue surplus can be used to incur capital outlay or pay off outstanding debt. Governments are required to service the debt by making periodic repayments of the principal amount along with the interest. This implies that states have limited flexibility in making decisions regarding tax rates on goods and services. During the 2015-20 period, states on an average have spent 2.3% of their budget on water supply and sanitation. Note that the finances of discoms are dependent on electricity tariffs. Relates to laws passed by states for the loans taken by such state-owned enterprises 1,01,200.! 1,01,200 crore underspending of 16 % ), and spirits the past the actual fiscal deficit in 2017-18 furnished. Unlike in other states ) 6.4 billion a year found in a year other states ) benefit by the... Towards developmental expenditure during the 2015-20 period ): RBI state of Finances! Sectors also witness underspending ; higher than budgeted due to non-uniform reporting of compensation grants expected by states the! 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