Himachal’s fiscal deficit up, poses new challenge to Cong govt

Shimla: Despite the ambitious goal set by Chief Minister Sukhvinder Singh Sukhu for Himachal Pradesh to become self-reliant by 2027, financial difficulties seem to be mounting each year.

As the Congress government’s term progresses, these financial difficulties are exacerbating, potentially threatening the state’s ability to fund development projects necessary for sustaining growth and infrastructure development

A report of the Comptroller and Auditor General of India (CAG) for 2022-2023 tabled in the state Assembly on the last day of the winter session at Dharamshala on Saturday painted a grim picture.

The gap between the expenditure and the total non-debt receipts has increased substantially in past five years. It has resulted in the fiscal deficit increasing to Rs 12,380 crore, almost 6.34 per cent of the Gross State Domestic Product (GSDP), which was Rs 3,512 crore in 2022-23.

The revenue receipts of the state are up by 2.09 percent but show a notable fall from 21.17 in 2021-22 to 19.49 in 2022-23.

The worst jolt the state is likely to face in the current financial year is cut in terms of Rs 1,800 crore as per recommendations of the 15th Finance Commission.

The total expenditure of the state has increased from Rs 42,806 crore in 2021 to Rs 50,565 crore in 2022-23, a jump of 18.69 percent. A revenue surplus of Rs 1,115 crore in 2021-22 turned to a revenue deficit of Rs 6,336 crore during 2022-23 while the fiscal deficit increased from Rs 5,245 crore in 2021-22 to Rs 12,380 crore in 2022-23, the report states.

What really shocks all is the decline in the capital expenditure which is going to be just 26.95 percent of the total borrowing of the state due to an increase in the burden of the interest liabilities and debt repayments beside the huge burden on wages, salaries and pensions of the employees.

The committed expenditure of the state, including interest payments, salaries and pensions, constituted 64 to 70 per cent of the revenue expenditure between 2018-19 and 2022-23.

Moreover, the inflexible expenditure of the state increased from Rs 1,607 crore in 2021-22 to Rs 2,020 crore in 2022-23, registering an increase of 25.70 percent. Together, the committed and inflexible expenditure in 2022-23 was Rs 31,983 crore — 71.99 percent of the revenue expenditure — which leaves lesser flexibility for priority sectors and capital expenditure, the report states.

The subsidy burden of the state has also increased from Rs 1,282 crore in 2018-19 to Rs 1,973 crore in 2022-23. The fiscal deficit is up by nearly three times in five years

Another key issue is the expected loss of Rs 1,000 crore which the government had expected by imposing water cess through the Hydropower Generation Act, 2023, which was quashed by the state’s High Court. The case is pending in the Supreme Court. Himachal Pradesh’s financial strain has worsened by rising costs for centrally sponsored schemes like Pradhan Mantri Awas Yojana (PMAY), MNREGA, and AMRUT, which demand higher outlays. Balancing developmental expenditures with the need to reduce fiscal deficits remains a key challenge for the state.