New Delhi: While the low-income states, like Bihar, have done well on the overall fiscal performance index (FPI) over the years, high-income states, such as Maharashtra, Gujarat and Haryana, figure among laggards, says a Confederation of Indian Industry (CII) discussion paper.
According to the paper, while Bihar has been the top performing state on FPI over the years, aided by improvement on all its component indices, it’s followed by Madhya Pradesh and Chhattisgarh.
The importance of state fiscal operations relative to size of central finances have steadily increased in recent years. The implementation of the goods and service tax (GST) last year has only intensified the focus on state finances, it says.
The CII analysis shows despite improvement in fiscal deficit index from 2012-13 to 2017-18, the Centre’s composite FPI remained more-or-less steady/moderate (except recording an improvement in 2015-16 and 2016-17). This has been largely due to moderation in revenue and capital expenditure and net tax revenue indices.
In case of states, the composite FPI index showed an improvement, despite the material worsening of fiscal and revenue deficit indices since 2014-15, largely on account of improvement on revenue, capital expenditure and revenue receipt indices.
The paper says the high-income states with low fiscal deficit to GDP ratio, like Gujarat, Haryana and Maharashtra, have performed poorly on the FPI against the low-income states with high fiscal deficit to GDP ratio, like Bihar and UP.
The high-income states have performed poorly, mainly on the expenditure quality indices and the own tax receipts index against their low-income peers. However, their performance on the deficit prudence index was above average.
High-income states like Maharashtra, Gujarat and Haryana have performed poorly on the expenditure quality indices and the own tax receipts index.
Among the low-income states Bihar, Chhattisgarh and Odisha have shown a consistently good performance on the FPI, mainly due to good performance on the expenditure quality indices. However, low-income states, such as Bihar, Jharkhand, Odisha, Rajasthan, have fared poorly on the own tax receipts index over the years, indicating a pressing need for redressal steps towards improving tax mobilisation.
Punjab, Rajasthan and Andhra Pradesh were at the bottom of the debt index, while Chhattisgarh, Odisha and Jharkhand among the top performers.