While the Union Budget is the mother of all, it is now evident the State Budgets in combination or independently have a considerable direct impact on citizens. Particularly when one is in reasonable financial shape and the other is not, or is compelled by politics to keep prices or taxes down.
With more States tabling their 2012 Budgets, IndiaSpend’s Dhritiman Gupta narrates a fiscal tale of two demographically similar states; West Bengal and Andhra Pradesh. He finds one state plagued by low revenues and mounting debt while the other enjoys rising revenues and lower debt.
Unlike the Union Budget 2012-13, there were not too many gives or takes in the two state Budgets. West Bengal increased taxes on luxury cars worth more than Rs 10 lakh, watches worth more than Rs 20,000, air conditioners larger than 1 tonne and colour television sets worth more than Rs 25,000.
A Tale Of Two Budgets
In general, Bengal has given away much more in exemptions. Though it hopes to recoup somewhat by shifting to electronic filing of taxes.
Andhra Pradesh on the other hand has increased its subsidy burden by lowering the PDS price of rice. But has not imposed any fresh taxes possibly because its tax collections have improved steadily (or so it says) because of improved and electronic tax governance. The table below tells the story.
West Bengal & Andhra Pradesh Financials
|West Bengal||Andhra Pradesh|
|Budget 2011-12||Revised 2011-12||Budget 2012-13||Budget 2011-12||Revised 2011-12||Budget 2012-13|
|1. Revenue Account|
|a. Revenue Receipts||65,847||59,143||76,943||1,00,995||97,194||1,16,786|
|b. Revenue Expenditure||74,138||76,417||83,801||97,169||96,414||1,12,342|
|Revenue Surplus (a-b)||-8,290||-17,273||-6,858||3,826||780||4,444|
|2. Capital Account|
|c. Capital Receipts||21,794||28,664||23,423||27,774||25,712||29,478|
|d. Capital Expenditure||13,507||11,562||16,571||31,371||26,445||33,511|
|Capital Surplus (c-d)||8,287||17,102||6,852||-3,597||-733||-4,033|
(Figures in Rs crores)
Before we go any further, here are a few definitions. Capital Receipt includes Loan Recoveries, Market Loans and Loans from the Central Government. Capital Expenditure includes Investments, Loans and Advances, and Repayment of Debt.
Now the first thing to take away from the table is that the two states have very different ways of financing their expenditure.
West Bengal is one of the very few states which have consistently spent more revenue than it has earned. In 2011-12 it had a Revenue Deficit of Rs 17,123 crore. It financed the deficit by taking loans, which forms a part of the Capital Receipts.
Andhra Pradesh on the other hand financed its excess Capital Expenditure (includes investments) from the surpluses on revenues. In 2011-12 Andhra Pradesh had a surplus of Rs 78o crore on revenues, which helped finance the excess investments.
However, the revenue surplus of Rs 780 crore was much less than the Rs 2,462 crore surpluses in 2010-11. The Budget has, however, projected a revenue surplus of Rs 4,444 crore in 2012-13, which though ambitious, is good news for Andhra Pradesh finances.
While in Bengal, there is a gross mismatch between Capital Receipts and Capital Expenditure. The state ran a surplus of Rs 17,102 crore on the capital account as against budgeted Rs 8,287 crore in 2011-12. This is a pointer to the fact that investment levels are low in West Bengal.
Tax Collection Records
Let’s take a look at the tax collections of these two states over the last year.
|West Bengal||Andhra Pradesh|
|Tax Heads||Budget 2011-12||Revised2011-12||Budget 2012-13||Budget 2011-12||Revised2011-12||Budget2012-13|
|Total Revenue Receipts||65,847||59,143||76,943||1,00,995||97,194||1,16,786|
|State Tax Revenue||27,690||24,934||31,222||56,438||53,398||66,021|
|Share in Union Taxes||19,166||18,587||21,975||16,826||17,804||21,964|
|Non- Tax Revenue||3,194||2,872||3,262||12,338||12,230||13,851|
|Grants-in- Aid from Centre||15,796||12,749||20,282||15,392||13,760||14,948|
(Figures in Rs Crore)
Interestingly, despite the population levels being similar, there is a wide gap between the Tax Receipts of Andhra Pradesh and West Bengal. In 2011-12, the Revenue Receipts of West Bengal was Rs 59,143 crore as against Rs 97,194 crore for Andhra Pradesh.
Besides, West Bengal depended on the Centre for a lion’s share of its receipts. It got 53 percent of its receipts from the Centre as against 33 percent in case of Andhra Pradesh.
Also worth noting is that West Bengal and Andhra Pradesh both fell short of their budgeted collections by Rs 2,756 crore and Rs 3,040 crore respectively in 2011-12.
However, Andhra Pradesh got more than the budgeted share in central taxes whereas West Bengal received less in 2011-12. Andhra Pradesh got Rs 17,804 crore as against a budgeted Rs 16,826 crore, a bonus of Rs 978 crore. West Bengal, on the other hand, got Rs 18,587 crore as against a budgeted Rs 19,166 crore, a loss of Rs 579 crore.
An additional area of concern for West Bengal is Non-Tax Revenues. In 2011-12, not only were the amounts collected very low when compared to Andhra Pradesh, but they also fell short of what was budgeted by Rs 322 crore, which is huge given the low budgeted amounts in the first place.
West Bengal Budget 2012
Now, West Bengal’s proposed state plan outlay is Rs 23,371 crore which is 11% higher than last year. There has been a rise of planned outlay in most of the departments, with the maximum in Agricultural Marketing which will get Rs 150 crore, up 318%.
The allocation and rise in a few departments:
West Bengal Departmental Allocations
|Department||Amount (Rs Crore)||Rise (%)|
|Agricultural Marketing Department||150||318|
|Department of Health and Family Welfare||1,049||20|
|Department of Food and Supplies||68||106|
|Department of Minority Affairs and Madrassa Education||330||70|
|Public Works Department||1,175||31|
|Department of Power||1,010||94|
In Tax, the main reform has been in the e-governance section. Tax returns will be e- filed now on. The government hopes to avoid tax evasions through this.
Otherwise, this budget has been one of tax reliefs and exemptions the only tax increase being on luxury goods like Motor Cars worth more than Rs 10 lakhs or television sets with an MRP above Rs 25,000. Such goods will be taxed at 14.5% instead of 13.5%.
Andhra Pradesh Budget 2012
Now let’s take a look at the salient features of the Andhra Pradesh Budget which envisages an overall expenditure of Rs 1.45 lakh crore, of which Rs 54,030 crore is plan and Rs 91,824 crore is non-plan expenditure. The Budget envisages a Revenue Surplus of Rs 4, 444crore.
Let’s take a look at outlays by sectors
Andhra Pradesh Sectoral Outlays
|Sectors||Amount (Rs Crore)||Rise (%)|
|Civil Supplies Department||3,175||19|
|Transport, Roads Buildings||5,032||22|
There are no specific reforms in the Tax Department possibly because tax collections have been good, more than enough to finance expenditures.During the year 2011-12, upto January 2012, the growth of overall tax revenue was 19.5%.
Tax Collections have improved after e-filing was introduced. It helped the state government to plug loopholes in collections.
The highlights of this budget however have been
1) Reduction of price of rice through PDS to Re 1 from Rs 2 per kg. This will benefit around 7 crore people.
2) Rs 1,075 crore interest free loans to farmers and SHG’s under “Vaddi leni Runalu.”
Growth Over Last Year
Now, let’s look at how the states have done on the growth front over the last year. Andhra Pradesh and West Bengal are underdeveloped, with about 70 per cent of the population belonging to the agricultural sector in both states. Despite this, both states managed to keep up to the national average growth rate of GDP of 6.9% in 2011-12. West Bengal grew at 7.06% and Andhra Pradesh at 6.81%. Bihar incidentally has grown at around 11% over the past few years.
Let’s look at the Debt and Interest Payments of the states:
Debt & Interest Payments Of West Bengal & Andhra Pradesh
|West Bengal||Andhra Pradesh|
|Budget 2011-12||Revised2011-12||Budget 2012-13||Budget 2011-12||Revised2011-12||Budget 2012-13|
(Figures in Rs Crore)
Source: West Bengal Budget 2012-13
The outstanding debt of West Bengal in 2011-12 was Rs 2,08,382 crore or 37.8 percent of the GDP. For Andhra Pradesh it was Rs 1,39,667 crore or 20.65 percent of the GDP.
As IndiaSpend reported, West Bengal has been a leader when it comes to Debt-GDP ratios only behind Uttar Pradesh. West Bengal has had a Debt-GDP ratio over 40 percent since 2002. It fell below that mark in 2011-12. Still the gross amount of outstanding debts is ominous at more than Rs 2 lakh crore. The interest payments on such loans were Rs 16,096 crore in 2011-12 and are expected to rise to Rs 18,108 crore in 2012-13.
Andhra Pradesh has done well to steadily reduce its Debt-GDP ratio to 20.65% in 2011-12 from 25%in 2006-07. However at Rs 1, 39,667 crore the outstanding debt is still a matter for concern, more so as it is projected to increase to Rs 1,60,191 crore in 2012-13. The interest payments also were huge at Rs 10,790 crore in 2011-12, even though they were considerably less than the budgeted figures.
Where Does The Money Go?
Let us look at outlays sector wise for the states.
Sector-wise Outlays Of West Bengal & Andhra Pradesh
|Sector||West Bengal||Andhra Pradesh|
|Agriculture and Allied Activities and Rural Development||5,026||4,223||5,092||6,320||6,332||7,961|
|Irrigation and Flood Control||2,931||971||2,675||15,000||11,800||15,000|
|Pensions and other Retirement Benefits||6,879||8,385||9,582||9,692||10,661||11,479|
(Figures in Rs. Crore)
Source:West Bengal Budget 2012-13
In 2011-12, West Bengal spent less than budgeted in almost all the important sectors while having massive overruns in other heads (classed under “Others”).
For example West Bengal spent Rs 3,522 crore more than budgeted on salaries and pensions but investments in Irrigation and Flood Control fell short of budgeted by Rs1,960 crore. Allocating funds to create productive assets in important sectors doesn’t seem like something West Bengal is good at.