The Hindu : Andhra Pradesh / Hyderabad News : ‘Fiscal position not up to expected levels’

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Friday, Feb 06, 2009
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Andhra Pradesh

Andhra Pradesh - Hyderabad

‘Fiscal position not up to expected levels’

Finance Minister Rosaiah acknowledges that impact of slowdown will be felt in State

HYDERABAD: The State government has admitted that the State’s economic situation during the current financial year “was not up to the expected levels” forcing it to revise projections for 2009-10.

In contrast to the earlier claims that the effect of the global recession on the State’s economy was nominal, Finance Minister K. Rosaiah acknowledged that “impact of the slowdown will be felt even if the government wants to escape from it.” Special Chief Secretary, Planning, A. K. Goel, added “we are already taking a major hit.”

Spending to be cut

Mr. Rosaiah, along with Principal Secretary, Finance, I.Y.R. Krishna Rao, and Mr. Goel, said that as the revenues were not up to the expected levels and with little scope for improvement in the near future, the government decided to cut spending significantly in some of the key sectors and had reduced the allocations accordingly. “We have projected a moderate growth as we want to go in a realistic manner,” he said.

Accordingly, revenue projection had been scaled down from 20 to 12 per cent which, in turn, had reduced the plan size significantly by 10.94 per cent – from Rs. 44,000 crore outlay approved by the Planning Commission for 2008-09 to Rs. 38,465 crore for 2009-10. Thanks to the meltdown, export orders were scrapped and the foreign direct investment declined. Foreign institutional investors too were pulling out their investments, he said.

Projections go awry

Coupled with this was the steep decline in the anticipated revenues from land sale – less than Rs. 5,000 crore was realised against the Rs. 12,000 crore projected. Besides, the government decided not to cut non-plan expenditure like 22 per cent interim relief announced for employees and pensions to different sections.

The government had significantly enhanced the subsidies for power from Rs. 2,300 crore to Rs. 5,040 crore and from Rs. 1,980 crore to Rs. 3,000 crore for supply of essentials, Rs. 2-a-kg rice in particular, through the public distribution system, making reduction in plan expenditure “inevitable”.

Mr. Rosaiah, however, asserted that despite the expenditure being incurred on welfare and other subsidies, the State would be within the limits of 3 per cent fiscal deficit mandated by the Fiscal Responsibility and Budget Management Act (FRBM) while it had already become revenue surplus.

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