Notes from PT 365 2022-(Economics)

1) State income sources (tax, nontax and grants) (trend 45% state own tax revenue, 28% share
in central tax, 20% grants from center and lowest is 8% states non tax revenue)
2) RBI ANNUAL report (State finances: study of budget ) Theme (Coping with pandemic: third
% in tier dimension ) main points (earlier consolidated gross fiscal deficit to GDP was 4.7% in
20-21 and now it got better to 3.7% in 21-22 && Debt to GDP ratio of states is already higher
31% ( than the limit 20% set by 22-23 by N K Singh committee or FRBM committee) &&
indication of erosion of debt sustainability, market borrowing is expected to reach 63% by
the end of march 2022, MARKET BORROWING is the largest component of outstanding
debt && share of National small savings fund and loans from banks and FIs and public
accounts have declined over the years && 15-+20% of revenue loss on the finances of local
authorities && increase in fiscal deficit (of state finances from 2.9% to 4.1% of GDP by 2.25
lakh crores (from 19-20 to 20-21)) increase in aggregate public debt (from 17.2% of GDP in
11-12 to 25.1% in 21-22) states own tax revenue is the largest source of revenue (45% of
total revenue receipt or 6.7% of GSDP) && lower property tax collection in India (0.2% GDP)
than developed countries due to property undervaluation and incomplete property records
&& strain on state finances from state owned power distribution companies (DISCOM) debt
3) Good state finances ensures stable macroeconomic stability, overall growth, employment
generation, debt sustainability
4) Reason for not good sustainability shortfall in tax collection, increase in cess and surcharge,
populist programs, lower capital expenditure, reduction of share from central to state tax
collection, low tax buoyancy , shrinking revenue autonomy
5) Steps taken by CENTRE and RBI to support STATES (A) Additional borrowing from 3% of
GSDP to 5% in 20-21 and of this additional 2%, 1% increase was to be permitted upon
completion of reforms in i) One nation one ration card ii) ease of doing business iii) power
distribution iv) Urban local body B) Special assistance to states for capital expenditure,
15000 crore for 50 years and out of this 5000 crore will be given to those who will carry out
disinvestment C) in Health sector centre has released around 80000 crore rupees under
National Health mission D) RBI measures- Overdraft facilities are relaxed and Ways and
means advance limit have been enhanced)
6) BALANCE OF PAYMENTS is influenced by (increase in population, structural changes in
economy, natural calamities, international capital movements, short fall in exports, cylical
fluctuations) if BOP deficit (Short term (increase in borrowing and increase in economic
growth) or long term (inflation and low standard of living)) and if BOP is surplus (Short term
(increase in domestic production and employment) or long term (country could become
dependent on export driven growth e.g. China))
7) Government securities (Short term- treasury bills (zero coupon securities and pay no
interest but actually they are sold at discounted rate and redeemed at face value at maturity
) with maturity less than one year (91/182/364 days only) and Long term- Treasury bills with
maturity one or more than one year)