• UGI USER
  • Apr 12, 2024
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“NAVIGATING STATE BUDGETS: INSIGHTS AND PROJECTIONS FOR FISCAL YEAR 2024-25”

Syllabus:

  • GS-3 – Indian Economy , Fiscal federalism and related issues

Focus :

  • Overview of the availability of state budget data and sources of information.
  • Analysis of state bond auctions in the current fiscal year and projections for gross borrowing.
Source- IE

Introduction:

  • The significance of understanding state budgets in the context of India’s fiscal health.
  • Overview of the availability of state budget data and sources of information.

Revenue Outlook:

  • Analysis of revenue projections for fiscal year 2024-25 based on available state budgets.
  • Expectation of a 9.2% growth in combined revenue receipts.
  • Discussion on the importance of accurate base revenues and own tax revenues (OTR) growth.
  • Concerns regarding lower-than-expected growth in key components of own taxes.

Transfers from the Centre:

  • Examination of taxes devolved by the Centre and projected growth for the fiscal year.
  • Historical trends in tax devolution and its impact on state revenues.
  • Variability in actual grants received from the Centre compared to budget estimates.
  • Factors influencing the decline in combined grants during April-February 2023-24.

Expenditure Patterns:

  • Forecast of revenue and capital expenditure growth rates for fiscal year 2024-25.
  • Analysis of the surge in capital expenditure during April-February 2023-24.
  • Expectation of a slower start to capital spending due to ongoing parliamentary elections.
  • Prediction of back-ended capital spending influencing state borrowings.
About Budget :

  • The government’s finances for the fiscal year that runs from April 1 to March 31 are reported in the Union Budget.
  • James Wilson of the British Indian Government presented the first budget of pre-independence India in 1860.
  • Finance Minister RK Shanmukham Chetty unveiled India’s first budget in 1947, the year of the country’s independence.
  • Budget preparation for the Union Budget is overseen by the Department of Economic Affairs under the Ministry of Finance.
  • The Budget is divided into two main classifications: the Revenue Budget and the Capital Budget.
  • The Revenue Budget encompasses the government’s expected income and expenditure within a fiscal year.Income sources for the Revenue Budget include taxes and other regular sources of revenue.
  • The Capital Budget focuses on the government’s assets and liabilities, involving significant expenses such as infrastructure development and procurement of equipment.

State Borrowing Dynamics:

  • Review of state borrowing trends in the previous fiscal year.
  • Examination of actual debt issuance in March 2024 compared to initial indications.
  • Impact of factors such as the model code of conduct and borrowing limits on state borrowings.
  • Analysis of state bond auctions in the current fiscal year and projections for gross borrowing.

Conclusion:

  • Projections for state gross borrowing for fiscal year 2024-25.
  • Anticipation of easing supply-demand dynamics in the government bond market.
  • Expectation of lower borrowing costs due to anticipated rate cuts by the Monetary Policy Committee.

Source:Indian Express

Mains Practice Question :

GS-3

“Discuss the significance of analyzing state budgets for understanding India’s fiscal health. Suggest measures to address challenges and ensure fiscal sustainability at the state level.”.(250 words)