Madhya Pradesh (MP), located at the heart of India, has shown a distinct trajectory in its public finance and budgetary policies. This state, characterized by its diverse socio-economic fabric, aims to balance developmental needs with fiscal prudence. This article delves into the various dimensions of Madhya Pradesh's public finance and budgetary trends.
1. Introduction to Public Finance in Madhya Pradesh
Public finance in Madhya Pradesh revolves around revenue generation, expenditure management, debt sustainability, and fiscal policies aimed at inclusive growth. The states economic structure, with agriculture, industry, and services playing critical roles, influences its financial framework.
2. Revenue Structure of Madhya Pradesh
a. Sources of Revenue
Tax Revenue:
GST collections form a significant component, supplemented by excise duties, stamp duties, and registration fees.
State-level taxes on vehicles, electricity, and property contribute significantly.
Non-Tax Revenue:
Revenue from mining, forestry, irrigation, and public sector undertakings.
Fees and fines also play a role.
Central Transfers:
Devolution of Taxes: A major portion of state revenue comes from its share in central taxes.
Grants-in-Aid: Specific and discretionary grants from the Union government.
b. Trends in Revenue Collection
Revenue collection has witnessed fluctuations due to external shocks like the COVID-19 pandemic, impacting GST and excise collections. Despite these challenges, mining and industrial activities have shown resilience, boosting non-tax revenue.
3. Expenditure Trends
a. Classification of Expenditure
Developmental Expenditure:
Focuses on infrastructure, health, education, and agriculture.
Flagship programs like the Mukhyamantri Gramin Sadak Yojana and Jal Jeevan Mission are significant components.
Non-Developmental Expenditure:
Salaries, pensions, and interest payments.
Subsidies on power and agriculture also form a significant part.
b. Major Expenditure Heads
Education and Health: Continuous efforts to improve literacy rates and healthcare infrastructure.
Infrastructure Development: Investment in roads, bridges, and urban amenities.
Social Welfare: Schemes targeting women, children, and marginalized communities.
4. Budgetary Trends in Madhya Pradesh
a. Budget Preparation and Process
The state's budget is prepared under the guidance of the Finance Department, adhering to fiscal responsibility norms.
b. Recent Budget Highlights
Fiscal Year 2023-24:
Revenue Receipts: 2.40 lakh crore.
Capital Expenditure: Focus on infrastructure and industrial corridors.
Fiscal Deficit: Estimated at 3.5% of GSDP, adhering to FRBM guidelines.
Sector-Wise Allocation:
Agriculture and Allied Activities: Subsidies for fertilizers, seeds, and crop insurance schemes.
Industries and MSMEs: Incentives for startups and small industries.
Education: Increased funding for government schools and digital education.
c. Key Trends Over the Last Decade
Steady growth in tax revenues driven by GST reforms.
Higher allocation for infrastructure, aligning with the state's industrial growth strategy.
Periodic fiscal deficits due to increased developmental expenditures.
5. Fiscal Responsibility and Budget Management (FRBM) Act
Madhya Pradesh adheres to the FRBM Act, targeting:
Reduction in fiscal deficit to below 3% of GSDP.
Rationalizing public debt to ensure long-term sustainability.
However, exceptions during crises, such as the pandemic, have resulted in temporary deviations.
6. Debt and Deficit Management
a. Public Debt
The states public debt has been increasing, with loans taken for developmental projects. Key observations include:
Debt-to-GSDP ratio remains within permissible limits.
Emphasis on productive borrowing for asset creation.
b. Fiscal Deficit
Managed prudently with efforts to cap it below 3.5% of GSDP. Temporary surges in deficit have occurred during economic downturns or natural calamities.
7. Challenges in Public Finance
Revenue Shortfall:
Dependence on central transfers leaves the state vulnerable to policy changes at the national level.
Fluctuations in GST and mining revenues.
High Expenditure Obligations:
Rising salary and pension liabilities.
Increasing demand for subsidies in agriculture and power.
Debt Sustainability:
Growing debt levels may limit fiscal flexibility.
Infrastructure Gaps:
Large capital requirements for bridging infrastructure deficits.
8. Reforms and Initiatives
Digitization of Tax Systems:
Implementation of e-Governance for improving tax compliance and revenue collection.
Public Expenditure Reviews:
Rationalization of subsidies and targeting welfare schemes to ensure efficient utilization of funds.
Infrastructure Development:
Public-Private Partnerships (PPPs) for leveraging private investment.
Skill Development and Employment Programs:
Initiatives like Mukhya Mantri Kaushal Samvardhan Yojana to reduce unemployment and increase tax revenue indirectly.
9. Comparative Analysis with Other States
Madhya Pradesh performs better than many states in terms of fiscal deficit management but lags behind developed states in per capita revenue generation.
Its focus on agriculture and rural development sets it apart from states with a higher industrial base.
10. Way Forward
To ensure sustainable growth in public finance, Madhya Pradesh needs to:
Enhance revenue mobilization through diversified sources.
Focus on reducing non-productive expenditures.
Promote industrial and service sectors to increase GSDP.
Strengthen fiscal federalism by engaging with the central government for equitable resource allocation.
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