Bengal is neck-deep in debt, says economist

Sitting on a huge debt burden of close to Rs 2 lakh crore, West Bengal government's finances are the worst among five highly-indebted states in the country, a noted economist attached with the Indian Statistical Institute here has said.

"Revenue deficit of the state is the highest among the five highly-indebted states of UP, Maharashtra, West Bengal, Andhra Pradesh and Gujarat," Abhirup Sarkar, the economist, said.

He said for the year 2009-10, revenue deficit (difference between revenue earnings and revenue expenditure) of the state stood at a staggering Rs 17,940 crore as compared to Rs 7,123 crore for Maharashtra.

"This situation has been continuing for years," he said.

On the contrary, Uttar Pradesh, which is the most indebted state, is enjoying a revenue surplus.

Sarkar said this was due to very poor collection of taxes and added that introduction of VAT did not bring buoyancy in revenue collection.

He said the entire trade in the North-Eastern region was routed through West Bengal.

Sarkar said there was corruption in collection of sales tax. "No official receipts were given for tax collected and I suspect that money might be diverted to party funds," Sarkar said. "This is a substantial amount," he said.

He said the main reason for poor revenue collection in the state was the decline in the trade and industry for a number of years.

Sarkar said expenses on capital account was low as a result of which there was hardly any creation of assets.

"Bulk of the collection is being used for salary, interest payments and subsidy," he said.

The situation has came to such a pass that the state finance minister Asim Dasgupta recently had to raise the VAT rates on luxury items by 1% to 13.5%. He also announced a 10% cut in non-plan expenditures.

Another economist and former professor of Indian Statistical Institute, Dipankar Dasgupta, has held that the situation in West Bengal is very grim and that the state will have to go with a begging bowl to the Centre for waiver of its debt.
   
"It is a very bad management of state finances", Dipankar Dasgupta said. He said the state had been borrowing more than what it was repaying, thereby, causing a debt trap kind of a situation.

Dasgupta said the revenue expenditure of the government was much higher than revenue receipts and all the funds borrowed by the state were being used for paying salaries rather than creating assets.

He said the Centre was unlikely to waive the debt as other indebted states could also demand the same.

Former state finance minister Ashok Mitra, predecessor to Asim Dasgupta, declined to comment.