West Bengal’s finances are not in good shape as SPR Foundation (IndiaSpend) has reported in the past. The situation warrants fire fighting measures though a closer look by IndiaSpend’s Sourjya Bhowmick shows the state is doing the opposite, with more expenditure heads and no corresponding income streams.

West Bengal’s outstanding debt stands at Rs 119,608 crore for 2010-11 (Reserve Bank figures) though Chief Minister Mamata Banerjee says that it is Rs 2,30,000 crore. The state’s Finance Minister Amit Mitra had earlier said Bengal’s debt was Rs 200,000 crore while former Finance Minister Asim Dasgupta said it was Rs 180,000 crore.

This is perhaps where the problems begin. Mr Mitra has already blamed the previous Left Front Government for this burden. And yet, whatever the size of the burden may be, Ms Banerjee is undeterred in her spending spree.

Her most recent move was to raise the age limit for recruitment in Government services to 40 years which opens the gates further. She then claimed her Government (which is barely 7 months old) has already created 2.75 lakh Government jobs. At this point it’s not clear which departments have created these jobs.

West Bengal’s Financials

Now, the bigger picture. RBI figures say West Bengal has a total state GDP of Rs 293,159 crore (as on August 2011), while its overall expenditure (revenue, capital and other expenditure heads) was Rs 285,286 crore in 2010-2011, as per West Bengal Government documents. Interestingly, the budget estimate for 2011-2012 says that state's pension bill has been pegged at Rs 6,879 crore or Rs 875 crore less than last fiscal’s, which was Rs 7,754 crore. This figure is just about the difference between the state's income and expenditure. West Bengal's salary bill, incidentally, was Rs 24,885 crore in 2010-2011. The total number of employees, as per the Census 2001 was 391,000.

West Bengal is ‘non special category ‘state in the documents of the Reserve Bank of India. However, RBI data shows that’s West Bengal fares poorly on development and social service expenditure too. 9% of state GDP is spent of development expenditure, which is around Rs 25,504 crore, the second lowest of all these 17 non special states.

The following table tells us how West Bengal has been hiking spend nevertheless. Source: Abstract of Annual Financial Statement, 2011-2012, Govt of WB.

The following table tell us how Mamata has been hiking the spend on the expenditure side, maybe with good reason too.

Expenditure Head (B.E)March 2011(Rs in crores)June 2011(Rs in crores)%age increase
School Education Department10002050105
Health& Family Welfare Department15128085
Social Welfare Dept (child welfare)40678694
Transport Department42142238
Public Health Engineering Department199671237

Source: Abstract of Annual Financial Statement, 2011-2012, Govt of WB.

Justified Spending Spree?

It could be argued that the increased spend is in deserving areas. But the fact remains that the income side is not showing any progress. For instance, to check inflation, the Bengal Government had exempted value added tax (VAT) on sugar.

Moreover, the state has said the policy of no taxes on food grains such as wheat, pulses, paddy and rice would continue. At the same time no new taxes have been levied on any items in the state. The state has withdrawn VAT on LPG too. Nor are there water taxes in Bengal.

On the other additional jobs, higher expenditure, unpaid pensions and dearness allowances, Bengal’s finances are reaching a point where mere pronouncements will not solve the problem.