UP fiscal deficit on rising trajectory

It has more than doubled under 4-year rule of Akhilesh govt

The fiscal deficit has been on the rising trajectory under the Akhilesh Yadav government in Uttar Pradesh.

The fiscal deficit has more than doubled during the four year rule (2012-present) of the Samajwadi Party dispensation from 2.64 in 2012-13 to 5.85 percent (revised estimates) in 2015-16.

Interestingly, the fiscal deficit under the previous Mayawati government (2007-12) had started falling after rising for the first two years of her regime.

However, under Akhilesh, the trend has reversed, which indicates fiscal slippages and reluctance of the state to mobilise its own revenue and tax resources.

The ballooning fiscal deficit is in sharp contrast to chief minister Akhilesh Yadav's promise of keeping it under 3 per cent.

In his maiden post-budget press interaction on June 1, 2012, when he had underlined the fiscal deficit had been kept below 3 per cent of the Gross State Domestic Product (GSDP) stipulated under Fiscal Responsibility and Budget Management (FRBM) Act.

He was then responding to media queries about the likely effect on state finances of the various populist schemes in the ruling Samajwadi Party manifesto, including free laptop, unemployment allowance, Kanya Vidya Dhan etc.

Interestingly, while most of such populist schemes have either been discarded or toned down, the fiscal deficit has been rising (See Table).

During 2015-16, the fiscal deficit as per budget estimates was pegged at 2.96, however, the revised estimates have now put the figure at a high of 5.85 percent. This is the second highest fiscal deficit in UP in over a decade with the highest being clocked at 5.96 percent during 2008-09 under Mayawati.

"The higher fiscal deficit is a cause of concern as it shows the government deviating from the FRBM norms. This deficit leads to higher market borrowings and resultant increase in the state's indebtedness," former Lucknow University (LU) economics department head Yashvir Tyagi told Business Standard.

He, however, added fiscal deficit should be seen in the context of revenue deficit. "If the state is able to contain its revenue deficit than the fiscal picture is not that bad, although both should be contained within manageable limits."

Meanwhile, the central government is mulling tweaking the FRBM Act norms to allow the state governments leeway with regards to fiscal deficit than the current austere level of 3 per cent.

UP fiscal deficit table

	Dispensation	Fiscal	Fiscal deficit	Per cent of GSDP (Current prices)
1	Mayawati	2007-08	Rs 13,794 cr	4.01
2		2008-09	Rs 20,512 cr	5.96
3		2009-10	Rs 18,692 cr	4.66
4		2010-11	Rs 17,247 cr	3.00
5		2011-12	Rs 15,431 cr	2.42
1	Akhilesh Yadav	2012-13	Rs 19,238 cr	2.64
2		2013-14	Rs 23,679 cr	2.77
3		2014-15	Rs 32,513 cr	3.40
4		2015-16 (Revised estimates)	Rs 64,316 cr	5.85
5		2016-17 (Budget estimates)	Rs 49,960 cr	4.04

Source: UP Budget document