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Resource Mobilization for State Plan

Resource Mobilization for State Plan. By S.Subramanya Secretary ( Budget & Resources) Government of Karnataka. Presentation Plan. Concept of government Finances How availability of resources for Plan are estimated? Karnataka Fiscal Responsibility Legislation and imposition of restrictions.

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Resource Mobilization for State Plan

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  1. Resource Mobilization for State Plan By S.Subramanya Secretary ( Budget & Resources) Government of Karnataka

  2. Presentation Plan • Concept of government Finances • How availability of resources for Plan are estimated? • Karnataka Fiscal Responsibility Legislation and imposition of restrictions. • Estimation of resources for 11th plan

  3. Part 1 Concept of Government Finances

  4. Expenditure Receipts Consolidated Fund Revenue Account Revenue Expenditure Tax Non Tax GoI Grants Non Debt Capital Receipts Devolution Revenue Deficit CF Capital Account Capital Expenditure Fiscal Deficit Public Account Government Finances Debt

  5. This portion of fiscal deficit is being used to fund Revenue Expenditure Revenue Deficit Revenue Surplus – not equivalent to accumulation of profit or cash Receipts Expenditure The State erodes into the savings made by the household and private sector to fund its current expenditure thereby reducing the net savings in the economy and thus hampering growth Revenue Receipts Revenue Expenditure State Debt Capital Expenditure Fiscal Deficit

  6. This Revenue Surplus goes into funding the extra capital expenditure Revenue Surplus Revenue Surplus – not equivalent to accumulation of profit or cash Receipts Expenditure The State generates savings in the public sector adding to the net savings in the economy augmenting the savings of household sectors and by using this surplus to fund capital expenditure stimulating growth Revenue Expenditure Revenue Receipts Capital Expenditure State Debt Fiscal Deficit

  7. Why should there be no Revenue Deficit • Revenue Deficit implies that the Revenue Expenditure of the State is greater than the Revenue Receipts. • The State borrows to meet even the current expenditure • Basic Principle: borrowings should never fund current expenditure but should be used only for Capital Expenditure • Growth depends on the Savings made by Household Sector and Public Sector, • Revenue Deficit indicates the extent to which State Government eats into the household and private savings to meet its current expenditure – RD is detrimental for growth • For growth, even government should generate (revenue) surplus and use it for capital expenditure

  8. Why should Fiscal Deficit be restricted? • Fiscal deficit is the difference between the total expenditure and the non-debt receipts which is met by borrowings • Fiscal Deficit per se is not bad provided • It is kept within a sustainable limit • There is no revenue component • Excessive fiscal deficit implies more borrowings leading to higher interest payments which would crowd out development expenditure in future • Fiscal Deficit causes intergenerational inequity and thus governments need to be cautious

  9. Part 2 How availability of resources for Plan are estimated?

  10. IR + SOTR IEBR EBR SONTR Balance of Current Revenues + - Devolution Financial Resources for Annual Plan Non-Plan Grants NCA ACA for EAPs + Central Assistance to State Plan Non Plan Non Devlp Exp Other ACA + Non Plan Devlp Exp Non-Plan Capital Receipts - Miscellaneous Capital Receipts Non-Plan Capital Expenditure Provident Fund Small Savings Market Borrowings Negotiated Loans

  11. Part 3 Karnataka Fiscal Responsibility Legislation and imposition of restrictions.

  12. Fiscal Legislations • Karnataka Fiscal Responsibility Act • (Consolidated) Revenue Deficit to be eliminated • Fiscal Deficit to be limited to 3% of GSDP • Any additionality should be offset by saving elsewhere or additional resources within above parameters • Karnataka Ceiling on Government Guarantees Act • Outstanding Guarantees to be limited to 80% of the Revenue Receipts of one year prior to previous year

  13. Trends in Fiscal Deficit

  14. Trends in Revenue Receipts and Expenditure

  15. Result of Fiscal correction • Revenue deficits have been eliminated. Fiscal deficit is contained with in 3 % of GSDP. • Debt stock is less than 33% of GSDP. Interest payments are less than 14 % of TRR. Expenditure on salary and pension is less than 30% of TRR. • Expenditure on capital formation has increased. Revenue surplus is being utilized for capital formation. • The state has received the fiscal Incentive facility provided by the 11th Finance commission. The benefit of Debt consolidation and debt waiver announced by the 12th Finance Commission has also been provided by GOI.

  16. Ability of the State in Financing the annual plans

  17. Post Fiscal reforms challenges • Conserving revenue streams. • Ensuring efficiency in expenditure. • Increasing allocation of resources to the social sectors like health and education, social welfare and infrastructure development. • Targeting of subsidies and reducing non targeted subsidies. • Promoting capital formation for durable growth.

  18. Part 4 Estimation of resources for 11th plan

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