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Anand Teltumble Reservations Within Reservations
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*6 October 10, 2009 vol xliv no 41 JBSEk Economic & Political weekly
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Economic & Political wki kly _3_ October 10, 2009 vol xi.iv no 41 17
Can Poor States Afford the this had on the expenditure on important
social services?
Fiscal Responsibility Legislation? 1 Introduction The Fiscal Responsibility and Budget Man
agement Act (frbma) at the centre was
TANYA SETHI notified in 2004. At the state level, the
tfc, whose recommendations covered the
An analysis of revenue and Aconcern with the fiscal and reve period 2005-10, recommended that each
nue deficits has always dominated state enact the fiscal responsibility legisla
expenditure trends in the six least
discussions on government financestion (frl). States' eligibility for a debt
developed states for the period in the mainstream media. For instance, waiver was contingent on enactment of
2003-04 to 2007-08 reveals how after the presentation of the union budget the frl. They were expected to eliminate
these states have met the Twelfth for 2009-10, there was much speculation their revenue deficits by 2008-09, and
Finance Commission revenue and criticism that the combined fiscal bring down the fiscal deficit to 3% of the
deficit at the centre and the states would gross state domestic product (gsdp) in a
deficit targets ahead of the
touch 12% of the gross domestic product phased manner by 2009-10.
2008-09 deadline. In their rush to (gdp) in 2009-10. However, it is self The timeline of enactment of the legisla
meet these targets, the states evident but not always acknowledged tion has not been uniform across the states,
that the case for fiscal sustainability with five states doing so in 2003-04 and
may have cut down expenditure
should not rest purely on numbers, but some others later, in 2006-07. The deficit
in the very sectors where indicators reveal that while the centre has
rather on the composition of expenditure
progress is most crucial to lift by the government. not been able to meet these targets, the
them out of their present least This article examines the trends in the states, at the consolidated level, achieved a
revenue and expenditure of the poorest of revenue surplus of 0.6% of gdp and a gross
developed status.
the states in recent years. This examina fiscal deficit (gfd) of 1.9% of gdp as early as
tion is done in the context of state govern 2006-07 (rbi 2008). In fact, these indicators
ments meeting fiscal and revenue deficit further improved to 0.9% and 1.5%, respec
targets as recommended by the Twelfth tively for the year 2007-08 (rbi 2009). Dur
Finance Commission (tfc). ing 2008-09, 25 states budgeted a revenue
Two questions dominate the analysis: surplus and 17 states budgeted a gfd at less
(1) How have these states met the targets than 3% of gsdp1 (rbi 2008). This has been
- through revenue expansion or expendi attributed to the incentive scheme as per the
Email: tanya@epw.in
ture compression? (2) What impact has tfc's recommendation, revenue buoyancy
l8 October 10, 2009 vol xliv no 41 Q3S3 Economic & Political weekly