Growth estimates undervalued
The state expects its economy to grow at a nominal 9.6% in the coming fiscal year, compared to 13.6% in FY22. According to India Ratings, this is an underestimate. It sees the state’s economy growing at a pace similar to last year, especially given inflation.
Higher revenue growth seen; Spending mix unrealistic
Based on its expectations for nominal growth, India Ratings expects Chhattisgarh to generate more revenue than it has budgeted for.
Revenue expenditure in FY23 is expected to grow 3.95% from revised FY22 estimates. This is not in line with the average revenue growth rate of 13.2% during FY16-FY20, the rating agency said.
Expenditure excluding interest income, which drives demand in the economy, is expected to grow by 3.66% in FY23. However, revenue expenditure excluding interest, salary and pension is projected to grow 1.4% according to the budget, even at a high growth rate of 26.5% in the revised FY22 estimates, which India Ratings says are quite optimistic. note.
Investments, on the other hand, are overstated in both the revised FY22 and FY23 budget estimates.
Capital expenditures in the fiscal year to close are expected to be 60% higher than the previous year. However, the data available so far suggests that the state will not be able to meet this target, according to India Ratings. In FY23, capex is up Rs 7.47%, which is above the average annual growth rate of 6% and on top of a high base.
“Annual capex growth for FY23 appears to be steep on an already inflated basis. India Ratings therefore believes the budget estimate for capex is too high and unattainable in FY23,” the note said.
Return of the old pension scheme
After Rajasthan, Chhattisgarh became the second state to go back to the old pension scheme for its employees. This is likely to put pressure on government finances in the long run, according to India Ratings.
The old pension scheme required a larger contribution from the state to pension benefits and was discontinued in the early 2000s as a way to improve state governments’ finances.
This post Return to old pension scheme could hurt state finances, says India Ratings
was original published at “https://www.bloombergquint.com/business/chhattisgarh-budget-return-to-old-pension-scheme-could-hurt-states-finances-says-india-ratings”