There are new governments in Rajasthan, Madhya Pradesh, Chhattisgarh, Telangana, and Mizoram. The five states have voted for the party on the poll promises and their performance. The challenge will be to balance the poll promises and the state’s economy.
All the states have delicate financial budgets, and watching how they can ensure that the state economy improves will be interesting. At the same time, the high investment-based poll promises are executed. It will be a tightrope walk, with the General Elections a few months away. The state leadership of three states and the central leadership of the BJP will have to do some mathematical jugglery to ensure both are achieved. Meanwhile, Telangana and Mizoram must prove they had done their homework before making ambitious poll promises. It will be an interesting journey for the new Chief Ministers in the Five states.
NEW PROJECTS TO IMPROVE CHHATTISGARGH’S ECONOMY
Chhattisgarh chief minister Vishnu Deo Sai is determined to fulfil every ‘Modi guarantee’. It is a tall task, but Sai is confident that his government is ready for the challenge. The state has a debt of ₹ 91,533 crore. That includes borrowing ₹ 50,000 crore in five years by the previous Congress government in the state. Notwithstanding the financial burden, Sai released the pending paddy bonus for the Kharif marketing years 2014-15 and 2015-16 to farmers’ bank accounts. The Cabinet also approved sanctioning 18 lakh houses for beneficiaries in rural areas under the Pradhan Mantri Awas Yojna (PMAY), a key promise made by the BJP as part of the Assembly Poll promise.
BJP had promised to give free rice to the poor for five years.
- For students, the BJP government has decided to give bicycles to the children of Class 9 and provide free textbooks till Class 12.
- Loan waiver of up to ₹ 2 lakh
- LPG cylinder for ₹ 500.
- Implement Mahtari Vandan Scheme: Married women to get financial assistance ₹12,000 annually.
Chhattisgarh is one of the fastest-growing states in India. Its Gross State Domestic Product (GSDP) is ₹5.09 lakh crore (US$64 billion) (2023–24 est.), with a per capita GSDP of ₹152,348. Chhattisgarh’s Economy is founded primarily on mining, agriculture, energy production, and manufacturing. The mining sector accounts for over 30% of the state’s Economy. The state produces a variety of minerals, including coal, iron ore, dolomite, limestone, and bauxite. Agriculture accounts for over 20% of the state’s GSDP.
The state’s current financial situation was reflected in the recent statement by Sai, where he revealed that the budget was approximately ₹ 1.21 lakh crore, with a debt burden of nearly ₹ 89,000 crore. In the Assembly’s first session, his government of Chhattisgarh presented a supplementary budget of more than ₹ 12,900 crore. He pointed out that the previous government accumulated a debt of ₹50,000 crore in five years, leading to the current debt burden on the state. He also highlighted that there would be no need to take loans if the state had received its share of more than ₹ 1 lakh crore from the Centre.
The state plans to host a global investors summit soon. This is expected to attract investment in its core resources and generate employment of the youth in the state. During the previous BJP government in the state, Dr Raman Singh, its chief minister, successfully conducted Global Investor Summits and attracted substantial investor interest. The growth and development of Naya Raipur was initiated under Dr Singh. Chief Minister Sai is expected to boost employment opportunities in the private sector during the next few years. This move will help the state increase its tax collection, both direct and indirect taxes. The central assistance that the state has been demanding for the last few years is also expected to be released soon.
MIZORAM TO USHER IN A NEW ECONOMIC DEVELOPMENT
Pu Lalduhoma, the new chief minister of Mizoram, has an opportunity to redefine the state’s economic growth and development. He will have to balance between promoting agriculture and developing small-scale industry. Attracting investments in areas like Tourism and floriculture are some of the suggestions made by various committees set up by the previous governments. Will he adopt those suggestions?
The new Government must focus on devising appropriate policies based on the requirements of these key sectors besides encouraging investments in these sectors, which, in turn, will ensure the long-term sustainable growth of the overall economy.
Based on their linkages and other economic considerations, including favourable agro-climatic conditions (factor endowment) and structural changes in the economy, the following sectors may be identified as potential key growth drivers of the State economy. Like Agricultural & Allied Sector: Rice, Vegetables, Fruits, consistent demand in local, national and international markets, floriculture, Animal Husbandry, Diary, and Fishery. Industry-Manufacturing Sector: Forest Based Industries, Handloom, Handicrafts, Agro Based Food Processing; Infrastructure Development: Roads, Energy, Water Supply, ICT, Sanitation & Sewerage; Services Sector: Tourism & Hospitality, Sports & Recreation, Education, Health Care, ICT, Transport Services; The above-identified potential key growth drivers of the State economy could be prioritized in a proper sequence that would provide maximum linkages in the economy for propelling and fueling economic growth and development in the state.
During the polls, ZPM had promised people it would remove the economic and governance-related hurdles. Mizoram has a debt-to-GDP ratio of 53.1%, indicating a high debt compared to the goods and services the economy produces. He has announced that the ZPM government will buy four local products from farmers, such as ginger, turmeric, chilli and broomsticks, by fixing minimum prices. Farmers will have the choice to sell their products independently or to the Government.
Constituting a mere 0.6 per cent of India’s area and 0.1 per cent of its population, Mizoram has an economy representing 0.1 per cent of the country’s total. Inflation remains a concern for the La lduhoma government. He and his team will have to address it on priority. Mizoram’s tax revenues have remained below 10 per cent of its revenue receipts over the past decade, primarily due to its agriculture dominated economy. Investing in different sectors, including sericulture, horticulture, and animal husbandry, among others, will have to be the new Government’s priority. It will also address the related issue of growing unemployment in the state with an improving literacy rate. The new Government has already announced that it will focus on agriculture-link roads and aim to export agricultural products in the future.
The bulk of the state’s revenue receipts comes from central taxes and grants-in-aid provided by the Union government. Despite revenue expenditures consistently exceeding 80 per cent of its total expenditure, Mizoram has managed a revenue surplus in most years. Consequently, the state’s debt levels have remained high, ranging from 34 per cent to 52 per cent of its GSDP over the past decade, Lalduhoma recently has already stated that his first 100-day priority would include putting in place austerity and economic measures to improve the state’s financial health.
NO MIDDLE PATH FOR MADHYA PRADESH TO GENERATE REVENUE
Mohan Yadav, the Chief Minister of Madhya Pradesh, is in for financial surprises, as was his selection to the top post in the State. No doubt, for him, fulfilling the prepoll promises and continuing welfare schemes will be an extremely critical tightrope walk. Due to various loans, the previous regime’s extra burden to the State’s exchequer with a heavy debt, estimated to be close to ₹4 lakh crore, will be a challenge.
Even before they went for the assembly elections, the political parties knew the financial criticality that whoever forms the government will have to undertake a financial balancing of lessening the state debt burden while ensuring the popular schemes are executed without delay.
Officials in the Madhya Pradesh state’s finance department are on overdrive of reviews of the State’s precarious financial position. They have estimated that the government would immediately require a loan of Rs 25,000 crore to meet the pol promises made to a cross-section of voters by the BJP party during the elections.
Less than two weeks after Yadav assumed office, he sought a ₹ 2,000 crore loan from the Reserve Bank of India (RBI) to meet the State’s expenditures. It is necessary to kickstart the poll promises; some were financial burdens on the exchequer.
This is the latest indication of the state government’s poor financial health and growing debt mountain as the ruling BJP embarks on the tough task of fulfilling its promises in the run-up to the recently held Assembly polls.
Some of the promises made by the BJP and will have to be implemented before Lok Sabha 2024 elections:
- Free ration to the poor for the next five years
- Procurement of wheat at ₹2,700 and paddy at ₹3,100 per quintal from farmers
- ₹12,000 to farmers every year under the Kisan Samman Nidhi and Kisan Kalyaan Yojana
- Beneficiaries of the Ladli Behna Scheme and Ujjawala Scheme to be provided gas cylinders at ₹450
- An opportunity for employment or self-employment to be provided to every household
- 6: Free education to every school student till Class 12th
- ₹4,000 per sack for tendu patta storage
The state government’s debt burden at Rs 3.5 lakh crore exceeds the budget estimates of Rs 3.12 lakh crore. The state government cannot levy extra tax except for petroleum products and liquor. This will severely restrict the expansion of revenue mobilisation by the state government. It is well known that by introducing GST, the State could levy excise duty and income raised from the sale of petrol and diesel cess.
The State government levies one of the highest taxes to generate over Rs 13,845 crore from liquor sales. It accounts for 16 per cent of the total income through taxation. It earns nearly 12,000 crore from the taxes levied on petrol and diesel. The VAT levied on petrol is more than Rs 21.50 a litre and over Rs 15 on every litre of diesel.
The government’s announcements and schemes made during assembly elections are now under pressure to be implemented in the run-up to the Lok Sabha elections. They are estimated to increase expenditure by at least 10 per cent. The opposition parties have already started to make noise that the average per capita debt on citizens of Madhya Pradesh has gone up to Rs 42,000.
RAJASTHAN FINANCES ARE SET FOR A ROLLER COASTER RIDE
The new Rajasthan CM, Bhajan Lal Sharma, will bank on several schemes he and his Cabinet announced after they took over the state economy from the Ashok Ghelot-led Congress government. The state must generate resources to meet pre-poll schemes promised during last year’s Assembly elections. It will be critical since their execution will impact the Lok Sabha polls scheduled in the next few months. Some popular schemes aim to strengthen women and youth in the state. It will be important since the voting percentage in these two segments was higher than in the previous assembly elections. Rajasthan Kisan Samman Nidhi Yojana
- Lakhpati didi scheme
- Free scooty scheme
- LADO incentive scheme Rajasthan
- PM Ujjwala scheme
- Chief Minister Housing Scheme 2024
- Government subsidy at ₹ 2700 per quintal rate
- CM Ekal Nari Samman pension scheme
- Rajasthan Mukhyamantri Kanyadan Yojana 2023
According to the latest reports from the state, despite a 17% increase in State Goods and Service Tax (SGST) and stamps and registration revenues, the total receipts of the state government recorded a dampened growth of 6% in the first six months of the current financial year 2023-24. The state expenditure grew 14% in the same period, resulting in a growth of fiscal deficit to ₹ 32,395 crore, over the ₹ 22,678 crore it registered during the first six months of 2022-23.
Rajasthan government’s revenue collection was also down. It was due to the fall of 6% in excise collection, lower VAT collection of 2.44%, and royalty revenue from crude oil production, which witnessed a massive drop of 38.61% at ₹1,777 crore as against ₹ 2,895 crore in the same period of 2022-23.
The state’s outstanding liabilities are estimated to be 39.80 per cent of the GSDP in 2022-23, which was marginally higher than the revised estimate for 2021-22 (39.53 per cent of GSDP) according to research done by The PRS Legislative Research budget analysis. Analysts who track the state’s financial performance pointed out that VAT has contributed the most to Rajasthan’s revenue. But high fuel prices in Rajasthan have diverted customers to neighbouring states with very low VAT rates. But the state has been losing out to its VAT collections from critical components like petrol and diesel.
Further, the non-tax revenue hit a rough patch when it dropped by 8.15% in 2023-24 to lower excise collection and royalty from crude oil. The reports indicate that Rajasthan’s total tax revenue during April-September stood at ₹ 72,776 crore. It includes the state’s tax revenue of ₹ 45,331crore and share in Central taxes of ₹ 27,445 crore compared to ₹ 63,556 crore (₹ 40,892 crore of own tax and ₹ 22,664 crore of share in central taxes) during April- September 2022 registering 14.51% increase. It was a relief for the state government’s fledgling tax collections. However, the GST collections have improved significantly over the past few months, raising the state of the collection in treasury. Deputy Chief Minister Diya Kumari, who belongs to the erstwhile royal family of Jaipur, is in charge of the Finance, Tourism and Public Works Department (PWD). She has her task cut out for the next five years.
TELANGANA: BATTING FOR AN OVERALL ECONOMIC DEVELOPMENT
Telangana Chief Minister A. Revanth Reddy has set his sights on a dynamic political and economic agenda. He knows the challenges of fulfilling promises like cash transfers, pension schemes, free electricity, cylinders, and land to a wide population base in the state. It ranges from women and farmers to students and martyrs’ families. These include the ‘Mahalakshmi’, ‘Rythu Bharosa’, ‘Gruha Jyothi’, ‘Indiramma Indlu’, ‘Yuva Vikasam’ and ‘Cheyutha’ guarantees and a few more. The financial challenges Telangana State Road Transport Corporation is reeling under accumulated losses of ₹ 6,000 crore. ₹.35,000 lakh crore for the next five years to implement the farm loan waiver.
The state is reeling under a debt of ₹ 5 lakh crore. The Centre has steadfastly refused to increase the borrowing limits under FRBM (Fiscal Responsibility and Budget Management Act, 2003). In Telangana’s Budget 2023-24, the total revenue was pegged at 2.16 lakh crore, while the revenue expenditure was 2.12 lakh crore. Telangana’s outstanding public debt is estimated to be ₹ 3,57,059 crore, according to the Budget estimates for 2023-24, which is 23.8 per cent of GSDP. The plan Reddy is reaching out to firms globally and in India to set up industry and help generate employment in the state. Recently, representatives of America, Iran, Turkey, UAE, the UK, Japan, Thailand, Germany, Sri Lanka, Bangladesh, Australia, France and Finland attended the event. He appealed to the respective countries to come forward to invest in Telangana by exploring the opportunities extended by the government. The government will maintain cordial relations with all countries; the CM appealed to the nations to make appropriate suggestions for the state’s industrial development,” the release stated. Reddy is scheduled to lead a highlevel delegation to the World Economic Forum (WEF) annual meeting in Davos from January 15 to 19 to attract investments. The government plans to hold the Global Investors Summit in Hyderabad in 2024 to promote Telangana as an ideal investment destination for companies and industries across the globe. The president & CEO of chip manufacturing giant Micron, Sanjay Mehrotra and Google vice president, Chandrasekhar Thota, met the Telangana Chief Minister and discussed possibilities of expanding business in the state. Telangana government is working on a ‘Mega Master Plan-2050’ to ensure widespread industrial growth and create jobs for the nearly 35 lakh unemployed people in the state and will be unveiling a policy soon.
As a part of this, Telangana will be divided into three clusters: an urban cluster within the Hyderabad Outer Ring Road (ORR), a semi-urban cluster between the ORR and the Regional Ring Road (RRR) and a rural cluster to be developed in areas beyond the RRR.
Along with food processing, sports, automotive and organic clusters, IT, pharma, and health industries can be established in Zaheerabad; Hyderabad has enormous potential for manufacturing. defence equipment. He is ensuring that industrial development does not remain confined to Hyderabad alone and that all regions of the state can grow like Hyderabad, as the prosperity and welfare of villages are also closely linked to the fast pace of development and investments in cities and towns.