CHENNAI: The State Government has come in for appreciation from the Comptroller and Auditor General for achieving reduction of fiscal deficit and primary deficit during 2003-04.

(Fiscal deficit pertains to the difference between the total expenditure and revenue receipts/non-debt capital receipts while primary deficit relates to fiscal deficit without interest payment).

The State's fiscal deficit, representing the Government's total borrowing and total resource gap, went down to Rs. 5,591 crores in 2003-04 from Rs. 6,742 crores in 2002-03. The primary deficit decreased to Rs. 891 crores from Rs. 2,609 crores. This was attributed to the "significant reduction" of revenue deficit, which was, in turn, the cumulative result of a 13.8 per cent growth in revenue receipts in 2003-04 and 1.6 per cent decline in revenue expenditure. Revenue deficit, the excess of revenue expenditure over revenue receipts, went down from Rs. 4,851 crores in 2002-03 to Rs. 1,565 crores in 2003-04, according to the CAG's report (civil) placed in the Assembly on Thursday.

Targets met

The CAG also noted that the State Government achieved almost all the targets set for 2003-04 under the Medium Term Fiscal Reforms Programme (MTFRP).

Of the two-dozen parameters, the Government fulfilled the targets in all but one. The only indicator in which the Government did not meet the target was interest payment.

The MTFRP plan is an outcome of the recommendations of the 11th Finance Commission, which, in its report of July 2000, laid down broad parameters for fiscal correction. Each State was required to draw up a programme to achieve the objective of zero revenue deficit by 2008-09.

In May 2003, the State Government passed the Tamil Nadu Fiscal Responsibility Act 2003, which included objectives required to be achieved by it under the MRFRP. It also signed a memorandum of understanding with the Union Government in September 2003.

No overdraft availed

The report said ways and means advances, a mechanism for taking care of any temporary mismatches in the flow of resources and expenditure obligations, had gone down sharply to about Rs. 1,710 crores in 2003-04 from around Rs. 8,624 crores the previous year. Besides, no overdraft was availed, reversing the trend of earlier years. For instance, in 2001-02, the amount of overdraft taken was nearly Rs. 4,110 crores and the next year, Rs. 1,911 crores.

Caution on expenditure

At the same time, the report cautioned the State Government that the percentage of total expenditure to revenue receipts in 2003-04 was 126, indicating that about 80 per cent of the State's total expenditure was met from its current revenue, leaving the balance to be financed by borrowings. Also, fiscal liabilities were more than twice the revenue receipts.

Noticing the "faster growth" of outstanding guarantees vis-à-vis the Gross State Domestic Product (as evident in the period of 1999-2000 to 2003-04), the report said the cap specified in the Fiscal Responsibility Act could be touched within a few years. The CAG called for reducing non-productive revenue expenditure, increasing the revenue receipts by restructuring and modernising the tax collection system, reprioritising resource allocation and curbing the tendency of utilising borrowed funds to meet current expenditure in the coming years.

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