Punjab to amend FRBM Act

Punjab has undertaken the process of bringing amendments to the FRBM (Fiscal Responsibility and Budget Management) Act, 2003, to make it conform to the recommendations of the 13th Finance Commission. It expects to complete it in the current session of the state Budget session. The state has also formulated its own fiscal correction path to achieve the targets of revenue deficit, fiscal deficit and debt to gross state domestic product (GSDP) ratio for the period of 2010-11 to 2014-15 as recommended by the 13th Finance Commission.

It is worth mentioning that the commission has linked the benefit of interest relief of Rs 703.3 crore for 2010-15 and release of state specific grants of Rs 1,450 crore for the period from 2011-12 to 2014-15 to the state, subject to the amendments in the FRBM Act 2003 and formulation of state’s own fiscal correction path according to the fiscal roadmap for the state suggested by the commission.

Further, the commission in its report has recommended a revised roadmap for fiscal consolidation and Central and state level. It has indicated that only three states namely Kerala, Punjab and West Bengal incurred revenue deficit in 2007-08. For these states, it has recommended the adjustment path commencing in 2011-12 and to eliminate the revenue deficit by 2014-15. Besides, it has as recommended a fiscal deficit path for all these three states to achieve a target of 3 per cent of GSDP by 2014-15.

The revenue deficit for Punjab for 2010-11 (Revised Estimate) is at Rs 3,705.2 crore (1.6 per cent of GSDP) and for 2011-12 (Budget Estimate) at Rs 3,379 crore (1.4 per cent of GSDP). Also, the fiscal deficit for the state for 2010-11 (RE) is at Rs 7,188.7 crore (3.1 per cent of GSDP) and for 2011-12 (BE) at Rs 8,801.3 crore (3.5 per cent of GSDP).

The commission has also set a target of 68 per cent of GDP for combined debt of Centre and states to be achieved by 2014-15 and has recommended fiscal consolidation path should lead to the steady reduction in the debt stock of the Centre to 45 per cent of GDP by 2014-15 and for the state to less than 25 per cent of GDP by 2014-15.

The outstanding debt of Punjab for 2010-11 (RE) is Rs 69,549 crore which is 30.4 per cent of GSDP of the state. Similarly, the outstanding debt for the year 2011-12 (BE) is estimated at Rs 77,585 crore which will be 30.4 per cent of GSDP of the state. Finance Minister Upinderjit Kaur mentioned the state is quite comfortably placed with regards to these milestones.