The West Bengal government's accumulated debt, as per the budget papers of the state government, is slated to rise to Rs 6,47,825.52 crore by March 31, 2024, a ten per cent rise over the figure of Rs 5,86,124.63 crore as on March 31, 2023.
What is equally alarming is that the state's per capita debt by the same period is slated to rise to Rs 59,000. Per capita debt is derived by dividing the total accumulated debt by the total population of the state.
Both the projected accumulated debt and per capita debt figures are extremely high compared to the corresponding figures as on March 31, 2011, which was the last year of the 34-year Left Front rule in West Bengal.
As on March 31, 2011, the accumulated debt figure was Rs 1,97,000 crore and the per capita debt figure was Rs 20,300.
Economists fear that unless urgent fiscal measures are adopted to arrest this upward trend, the state will slowly inch towards a debt trap situation, which is a point where the state has to go for fresh borrowings just for servicing the older debts. That situation comes when the debt to GSDP ratio reaches 50 per cent.
In fact, the state budget papers for 2023-24 give some clear indications of the high expenditure of the state during the fiscal under review behind servicing previous debts.
As per the budget documents, during the fiscal ending March 2024, the state government will have to shell out Rs 73,303.68 crore for repayment of principal and interest on earlier borrowings, as mentioned in the budget estimates for the fiscal under review, up from Rs 69,691.79 crore as mentioned in the revised estimates for 2022-23.
Economists believe that while the first reason for this rising accumulated and per capita debt in West Bengal is because of the rising non-plan expenditure, the second reason is the lack of adequate avenues for improving the state's own tax revenues which is purely state excise dominated.
With a 19.41 per cent projected growth during the financial year 2023-24, state excise will continue to be the principal component for generation of the state's own tax revenue.
While the state's tax revenue, as per the budget estimates for 2023-24, is slated to increase by just 12.69 per cent to Rs 88,595.54 crore from Rs 79,500 crore as per the revised estimates for 2022-23, the excise collection is slated to rise to Rs 17,921.56 crore, up by 19.41 per cent from Rs 15,001.39 crore as per the revised estimates for financial year 2022-23.
Another significant factor on this count is that in 2023-24, state excise, which is just one of the 12 components of the state's own tax revenue, will contribute 20.22 per cent to the total tax kitty.
According to the former chief economic advisor to the Union government, Ashok Kumar Lahiri, who is currently a BJP legislator, since the focus of the state government is more on recurring expenditure rather than capital expenditure like infrastructure development the investors are shying away from the state.
According to him, it means employment generation is not just in terms of direct employment in big industries but also in forms of development of ancillary and associate industries, which can enable a long-term economic growth of the state. "But the focus of the state government seems to be more on spending on non-productive expenditure like fairs and festivals," he said.
Economist P.K Mukhopadhyay also seems to be worried at the trend of expenditure of the state government or rather how the borrowed money is utilised.
The main part of the expenses of the state government is for recurring or non-plan expenditure. Lesser spends in capital expenditure means lesser assets creation and lesser employment generation. This is the area in which the state government should concentrate and increase the proportion of capital expenditure and subsequently reduce the spending on non-plan expenditure, he said.
Industry observer and professor of economics Santanu Basu feels that the only way to arrest the looming financial disaster is to attract big ticket investment by revising the land and special economic zone laws.
"In a state like West Bengal with extremely fragmented land holdings, the state government has to have some role in land procurement for industry. No industrialist will be willing to invest in the state if they have to approach all the landowners to get the land for industry," Basu added.
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