Mumbai3 minutes agoAuthor: Gurudutt Tiwari
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For a decade, free schemes and subsidies have been the ‘surefire recipe’ for states to gain power. But the deteriorating financial health of the states is emerging as a major side effect of this solution. States do not have money for electricity, roads and housing.
The accounts of their earnings and expenditure show that after major expenses like subsidies, salaries, pensions and interest payments, states are left with only 20-25% of their earnings. A state like Punjab is left with only 7% of the funds for expenditure.
However, it also has to repay the principal amount of ₹90 thousand crore this year. Therefore, Punjab will need a huge loan to repay the principal amount with this remaining amount. Punjab has taken a loan of ₹ 20 thousand crore from the market in October this year.
This time Rajasthan has to repay the principal amount of ₹ 1.50 lakh crore loan. Rajasthan has taken a loan of Rs 32 thousand crores, but the outstanding is more than the limit of taking loan. He will also need to take a loan to repay the loan.
Bihar may go bankrupt in fulfilling election promises
The debt of states like Madhya Pradesh, Rajasthan, Punjab, Bihar is close to one-third or more than their GDP. In such a situation, the burden of repayment of principal amount may increase further in the coming years.
The burden of fulfilling election promises in Bihar could be 25 times the state’s capital expenditure. The state may go bankrupt.
Big states like Maharashtra and Karnataka spend a large part of their earnings only on salaries, pensions and other essential expenses. Only a small amount is available for development.
In many states, including Rajasthan, 45 GW of solar and wind energy capacity is stuck because governments are not able to even sign power purchase agreements.
Everyone is in trouble: Interest burden on Bengal is more than the education budget, debt is increasing on MP
- Bengal: 21.2% of the earnings go towards paying interest. This is more than the combined budget of education-health (18.7%).
- Rajasthan: Due to increasing burden of debt and interest, expenditure on health budget is stagnant.
- Madhya Pradesh: Due to schemes like Ladli Brahmin, the burden of loan interest is increasing.
- Karnataka: Guarantee schemes are increasing the burden of interest payment compared to last year.
- Maharashtra: Approval of 903 development projects canceled in June. Most of the irrigation was related to dams.
Relief possible from closure of old government schemes
Retired IAS and state finance expert Ajit Kesari says that while announcing a free scheme or subsidy, it is important to see what the sources of income are. Governments that come to power with new schemes do not stop the schemes of the old government.
According to Ajit Kesari, the government is afraid that people might get angry. Assam government had ended the schemes of the old government. If other governments also take such steps, some of the burden can be reduced.
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