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Raman Singh battles 15-year anti-incumbency with mixed fiscal track record

Raman Singh
Raman Singh, the three-term chief minister of Chhattisgarh, is likely to face an uphill political battle. Not only does he have to confront a 15-year anti-incumbency, but he also has to deal with stretched government finances and a state economy that is slowing down.

Chhattisgarh’s gross state domestic product (GSDP) slowed down to 6.65 per cent in 2017-18, from a high of 9.8 per cent in 2013-14, according to data compiled by NITI Aayog. The government's budget documents project a higher fiscal deficit in the medium term, from 2.8 per cent of GSDP in 2018-19 to 3.5 per cent in the next two years.

However, Chhattisgarh’s debt burden is well within the limits set by the 14th Finance Commission, and as a result, its interest outgo also gets contained. On the social development front, its health and education expenditure has consistently improved under Singh’s 15-year tenure.

In the initial years of the Bharatiya Janata Party’s present term under Singh, the state’s fiscal deficit achieved a low of 1.4 per cent of GSDP in 2016-17, from 3.4 per cent in 2014-15.

However, subsequently, it deteriorated sharply, rising to 3 per cent in 2017-18. And though the government has projected it to decline to 2.8 per cent in 2018-19 (BE), it expects it to rise to 3.5 per cent in 2019-20 and 2020-21.

Part of the deterioration in the state’s fiscal position can be traced to the sharper-than-expected growth in the government’s revenue expenditure, even as actual revenue exceeded budget projections.  

The state’s revenue expenditure rose from Rs 481 billion in 2016-17 to Rs 653 billion in 2017-18 (revised estimate), implying an increase of Rs 172 billion. In comparison, however, the states’ revenue receipts rose by a smaller amount: from Rs 536 billion in 2016-17 to Rs 685 billion in 2017-18 (RE). These estimates are based on a report by PRS Legislative Research.

Low debt and interest burden  

Chhattisgarh’s debt-to-GDP ratio rose from 12.6 per cent in 2014 to 17.4 per cent in 2018-19 (budget estimate). But despite the rise, it is lower than the upper limit of 25 per cent set by the 14th Finance Commission. Its interest payments-to-revenue receipts ratio is at 5.3 per cent in 2018-19, as against the upper limit of 10 per cent set by the Finance Commission.

In May 2016, the union government permitted states that restricted interest payments to or below 10 per cent of their revenue receipts, and whose debt was curtailed below 25 per cent of their GSDP, and revenue account was balanced or in surplus, to avail borrowing of an additional 0.5 per cent of GSDP.

“Chhattisgarh meets many of these criteria, which may have prompted the state government to indicate a fiscal deficit to GSDP ratio of 3.5 per cent in its medium term fiscal policy,” said Aditi Nayar, principal economist at Icra.

Surprisingly, the state has been rather conservative in its revenue and expenditure projections in an election year. For 2018-19, it has projected total expenditure to grow by mere 6 per cent, down from 36 per cent in the previous year. Similarly, revenue receipts are also pegged to grow at 6 per cent in 2018-19, from 28 per cent the year before.

Health and education get a bigger pie, capex rises

On the social welfare front, the government’s performance has improved during Raman Singh's long tenure.

Under his chief ministership, spending on education as a proportion of aggregate expenditure rose from 12.3 per cent in 2004-05 -— his first budget -— to 18.2 per cent in 2018-19. Similarly, spending on health and family welfare rose from 3.3 per cent of total spending in his first year in power, to 5.8 per cent today.

However, Chhattisgarh’s education-to-aggregate expenditure ratio declined marginally from 20.2 per cent to 18.2 per cent in the current term.

The state has steadily improved its capital expenditure. Total capital expenditure by the government rose from 2.8 per cent of GSDP in 2014-15 to 3.36 per cent in 2016-17, and further to 4.44 per cent in 2018-19 (BE). Much of this increase in spending is focused on infrastructure, especially on building roads and bridges in the state.

While Chhattisgarh's per capita income is higher than that of Rajasthan and Madhya Pradesh, the three states share a demographic similarity. According to Census 2011, the 10-14 age group was the most populous in these states.

The same age cohort is in the 17-21 age group now, which would now be looking for jobs, and perhaps, voting in this election.