The Lankan economic crisis triggered by populist and bad economic policies has alarmed policymakers in India. The Fifteenth Finance Commission Chairperson NK Singh has raised concerns over the competitive populism of some state governments.
Earlier, when the southern country had gone bankrupt, top Indian bureaucrats had shot off a missive to PM Narendra Modi cautioning how many states are on the verge of slipping into the bankruptcy whirlpool.
In this growing chorus demanding reining in of economic policies, the SBI Research has released a report on Tuesday that has clearly detailed how by distributing largesse to voters, many states in the country are spending beyond their purse limits.
Profligate States
While the report has named Rajasthan, Chhattisgarh, Andhra Pradesh, Bihar, Jharkhand, West Bengal and Kerala, Odisha didn't find a mention in the list of profligacy.
The report said, "States like Rajasthan, Chhattisgarh, Andhra Pradesh, Bihar, Jharkhand, West Bengal and Kerala have all committed to spending 5-19 percent of its revenue receipts on schemes like Samagra Shiksha Yojana, Primary Health Centres, farmer support scheme, pension scheme, cheap food scheme et al.
Odisha Better Placed?
The State government here has also a populist tooth. The budgets over the years had announced a litany of populist schemes.
A detailed look at the SBI report shows that the omission is by default. Because State FM Niranjan Pujari has not presented a full-fledged budget for FY23. He has tabled a vote-on-account last month.
However, an analysis on the lines of SBI indicators hints at all is not well in Odisha.
Odisha Freebie Status - A Reality Check
Like the above-mentioned states, the Odisha budget has earmarked a significant chunk of funds for many schemes that sound populist.
An analysis of the 2022-23 Vote-on Account documenting the allocations to the following populist scheme shows that spending by the State government has been around 7 percent of the total revenue receipts. On the other hand, the populist schemes consume nearly 23 percent of the State's own tax revenue. Below is given a litany of populist schemes and allocations.
- Samagra Shikshya Abhiyan --- Rs 3,552 cr
- KALIA Yojana ---- Rs 1874 cr
- Mukhyamatri Swasthya Seva Mission - Rs 2335 cr
- Aahar and Pension schemes et al - Around Rs 1000cr.
- Biju Swasthya Kalyan Yojana -- Rs 1864 cr.
Why BKSY is considered a populist scheme when nationally Ayushman Bharat (AB) is implemented?
- The reason behind this is, had Odisha implemented the AB scheme, it would have spent only 40 percent of the funds spent for the scheme from its exchequer. But the State is now funding 100 percent of the scheme,
Meanwhile, the SBI research report's re-estimation of GSDP of states has flagged another concern. The SBI GSDP estimates for Odisha differ from the State budget numbers.
Odisha Growing Slow?
The Economic Survey tabled in the State Assembly recently has put Odisha's nominal GSDP growth rate higher than the country's GDP growth rate. But the estimates released by SBI research today indicate otherwise.
As per the SBI research report released on April 19, the nominal GSDP growth of Odisha (as per the budget document) in the FY 2022 had been 10.1 percent. Post the adjustment done taking into account the average Consumer Price Index (CPI) inflation rate of 3.7 percent, the real GSDP of the State in FY 2022 has been estimated at 6.4 percent.
The report has estimated the real GDP growth rate of the country at 8.9 percent in FY 22, which is nearly 1.6 percent higher than Odisha's GSDP.
Similarly, in the indicator of nominal GSDP growth rate, Odisha has been lagging by a massive 9.3 percent behind the nation's nominal GDP growth rate in FY 22.
"At all India level, NSO has estimated 8.9 percent growth in real terms and 19.4 percent in nominal terms for FY22. For FY23, Union Budget 2022-23 projected nominal growth of11.1 percent," the report observed.
As per the Vote on Account tabled in the State Assembly, FM Niranjan Pujari has put the nominal GSDP growth rate of the State in FY 23 at 12.7 percent.
Red Flags For Odisha
The SBI report has cautioned the states for allocating a larger proportion of the budget for committed expenditure items. The report further stated that such a pattern of expenditure limits the states' flexibility to decide on other expenditure priorities like developmental schemes and capital outlay.
As per the Odisha Budget document, the committed expenditure estimated in 2022-23 was Rs 55,936 cr. The total annualised change between 2019-20 to 2021-22 has been estimated at 9 percent. The committed expenditure accounts for nearly 39 percent of total revenue receipts in the State.
The Bottomline
A look at the SBI research report reveals that the situation has been very critical in Rajasthan, Telangana and Andhra Pradesh where the freebies account for 17-35 percent of revenue receipts. Therefore, all eyes are on the full-fledged budget to be tabled in Odisha Assembly in June.
Above all, the real GSDP estimate by SBI shows that the State is yet to be in the pack of top racers.