By Saibal Gupta
Kolkata, Jan. 20 (IANS): A quantum leap in market borrowing by the government of West Bengal in the current fiscal year gives a strong impression that the state government is currently trying to meet the extra expenditure needed for social schemes like Swastha Sathi or Lakshmir Bhandar announced by Chief Minister Mamata Banerjee before the election.
Simple arithmetic will make this easier. During the period of April 2020 to December 2020 when state revenue dropped to an all-time high due to the lockdown, the state raised around Rs 35,000 crore from the market but it is interesting to note that in the current financial year between April 2021 and December 2021, the state has opted for a market borrowing of Rs 52,500 crore. During the same period in 2019, the state borrowed Rs 28,000 cr through a state development loan.
However, a little deeper analysis will make things clearer. According to a notification issued by the Reserve Bank of India (RBI), a total of 12 Indian states have opted for a total market borrowing of Rs 20,659 crore on January 18, 2022. West Bengal’s borrowing in this tranche will be Rs 1,000 crore.
However, the silver lining is that unlike the previous three tranches, West Bengal is not the highest borrowing state, but it is Uttar Pradesh with the borrowing figure of Rs 3,000 crore that is the highest. raised.
This is the second tranche of market borrowings by the Government of West Bengal in the current month of January 2022. Earlier on January 6, 2022, the government of West Bengal borrowed Rs 2,500 crore, being the highest state borrower in this tranche. As of this date, nine Indian states have borrowed a total of Rs 19,340 crore on the open market.
Also in the last month of December 2021, West Bengal borrowed twice on the open market. On December 14, 2021, seven Indian states borrowed a total of Rs 7,053 crore. The state borrowed Rs 2,500 crore – the highest among state borrowers in this tranche.
Again, on December 24, 2021, 16 Indian states borrowed a total of Rs 22,984 crore, with the borrowing figure for West Bengal standing at Rs 4,000 crore. West Bengal was also the highest borrowing state in this tranche. This means that in just 35 days, from December 14, 2021 to January 18, 2022, West Bengal borrowed Rs 10,000 crore on the open market.
According to experts, with the decline in revenue generation, multiple borrowing from the market has now become the key constraint for the government of West Bengal to meet its recurrent expenditures. Experts are of the view that the state is struggling with out-of-plan spending mainly to deliver on promises made by Chief Minister Mamata Banerjee during her election campaign.
After coming to power for the third time, Banerjee announced two major projects – “Lakshmir Bhandar” and “Swastha Sathi” for all – projects which require huge financial involvement. “Lakhmir Bhandar is a project where the state is supposed to give Rs 1,000 to women belonging to SC/ST/OBC and Rs 500 to women belonging to general caste. The government has allocated a budget of about Rs 12,900 crore to about 1.8 crore women who have so far enrolled in the scheme.
Initially, the government had estimated that around 2 crore beneficiaries would register for “Lakshmir Bhandar”, but so far the government has received an application for 1.63 crore of which 1.52 crore have been approved. Nearly 7 lakh requests have been canceled. The government has spent more than Rs 800 crore on the project and based on the figure, the Ministry of Finance estimates that the state government will have to shell out another Rs 5,600 crore which in turn could lead to a staggering figure over a full fiscal year.
Against the central Ayushman Bharat, the state started its own scheme – “Sastya Sathi Prokolpo” where some citizens of the state received annual medical coverage of five lakh rupees. After coming to power in 2021, the Chief Minister opened ‘Svastha Sathi’ to all citizens of the state, resulting in a surge in spending. Even a year ago when the estimated budget for this project was around Rs 925 crore, this year the allocation touched an astronomical figure of Rs 2,000 crore per annum.
As a result, the state must look to the free market to meet additional financial needs. Economists say the government’s overreliance on market borrowing is an alarming trend and if not properly regulated could lead to economic collapse.
The first is that over the past ten years, the state’s out-of-plan spending has ballooned to such an alarming level that the government has become forced to borrow in the market to meet these expenses. Second, since the state government does not have a stable and alternative source of revenue generation, it must rely on borrowing from the market.
Finally, economists fear that the state government is on the verge of falling into a debt trap, where it has resorted to new borrowing to pay off past debts. Economists also estimate that currently the ratio of debt to state gross domestic product (GSDP) in West Bengal has reached 30% and things will spiral out of control if it reaches 50%.
Economic and financial experts also believe that this borrowing trend highlights two things. According to them, in the absence of a proper revenue generation model where state excise is not the only source, there will be no choice for the state government but to opt for regular borrowings on the market. The second factor is that as a result of soaring out-of-plan spending in recent years, there has been an increased need for market borrowing to meet these expenses.