State Finances In Bihar An Overview
Post on 06,May 2013   9:56 AM
By - PolyEyes Staff
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Patna: Bihar has been showing a continuous revenue surplus since 2004-05. This surplus had reached Rs 6316 crore in 2010-11, the highest ever level, before falling to Rs 4821 crore in 2011-12. 

The revenue receipts increased by nearly Rs 6800 crore mainly due to the increase in tax revenues (Rs 6699 crore). The development expenditure of state government has increased substantially from less than 50 percent of its total expenditure in 2005-06 to 65 percent in 2007-08 and had remained at that level subsequently.

The gap between plan and non-plan expenditure had also started closing since 2005-06
when it was 3.6 times the plan expenditure. It came down to 1.4 times the plan expenditure in 2010-11. However, in 2011-12, the non-plan expenditure rose to 1.6 times the plan expenditure. 

Total plan and non-plan expenditure during 2011-12 were Rs 23,008 crore and Rs. 37,172 crore respectively. The state government had an outstanding debt of Rs. 44,475 crore in 2007-08, equaling 39 percent of its GSDP. It came down from 53 percent of GSDP in 2000-01. By 2011-12, the outstanding debt had increased to Rs. 60,551 crore, but the Debt: GSDP ratio had declined substantially to 24 percent, well below the limit of 28 percent specified by the Twelfth
Finance Commission.

Bihar’s Gross Fiscal Deficit (GFD) was only Rs. 3971 crore in 2010-11, but it sharply increased to Rs. 5915 crore in the subsequent year. In 2012-13 (BE), it is projected to rise further to Rs 7569 crore, due to higher capital investments. As a percentage of GSDP, the GFD has risen from 1.97 percent in 2010-11 to 2.52 percent in 2012-13 (BE).

Transfer of resources from the central to state government form around two-thirds of its total expenditure; in 2007-08, central transfers had met 73 percent of the expenditure needs of thestate government and, in 2012-13 (BE), this share stands at 65 percent.The contribution of state government's own resources increased from 18 percent to 24 percent of its aggregate total disbursements during the period; the rest is covered mostly by market borrowings of the state government.

The state government's own tax revenues have grown from Rs. 5086 crore in 2007-08 to Rs. 15,664 crore in 2012-13 (BE), while the non-tax revenues have grown from Rs. 526 crore to Rs. 3142 crore during the same period.

The major sources of receipts are Sales Tax (VAT), Stamp and Registration Fees, State Excise Duty, Taxes on Goods and Passengers and Taxes on Vehicles. These five taxes together account for as much as 98 percent of the state government’s total tax receipts. Of these, Sales Tax alone comprised 59 percent in 2011-12, followed by State Excise Duty (16 percent), Stamp and Registration Fees (12 percent) and Taxes on Goods and Passengers (7 percent).

Of the total expenditure of Rs. 60,180 crore in 2011-12, the expenditure on social services accounted for 31 percent of the total expenditure, followed by economic services (17 percent). Capital outlay accounted for 15 percent of total expenditure, down from 18 percent a year before.Discharge of public debt accounted for 5 percent of the total expenditure, while loans and advances by the state government made up for the remaining 3 percent of total expenditure.

The salary of the state government employees alone accounted for 26 percent of the total revenue expenditure in 2011-12; it was 28 percent the year before and is likely to reduce to 24 percent in 2012-13.

The quality of expenditure in Bihar has undergone significant improvement over the recent years. The non-salary component of developmental revenue expenditure had increased from 69 to 74 percent during this period, while the share of plan expenditure in total expenditure had increased from 35 to 42 percent. The ratio of plan to non-plan expenditure has also systematically increased from only 53 to a high level of 74 percent.


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