Bengal’s fiscal health: Debt to GSDP ratio, past debt service matters of concern

Serious concerns are being raised from various quarters on the trend of borrowing by the cash-strapped West Bengal government and the nature of using the borrowings.

The first concern is the huge debt to gross state domestic product (GSDP) ratio in the state. As per the statistics of the state finance department and the latest CAG report, West Bengal’s debt to GSDP ratio for the financial year of 2020-21 reached an alarming level of 37.05 per cent, up from 35.68 per cent in 2018-19.

According to professor of economics, P.K. Mukhopadhyay, if one takes into account the trends of the market borrowings by the state government for the last 10 years and its projected borrowing for the ongoing financial year, there is a clear indication that the debt to GSDP ratio will rise further in the coming financial years.

“As a teacher of economics, I am worried that West Bengal is inching towards a debt to GSDP ratio of 50 per cent, a situation which will be totally out of control unless some drastic fiscal measures are taken, especially with regard to curtailment of recurring and non-plan expenditure. We must find out alternative means of revenue generation other than state excise,” he said.

Another alarming trend is the percentage of spends of fresh borrowing for the servicing of old debt.

An analysis of the state budget papers for the last five financial years shows that almost 72 per cent of the fresh market borrowings in every fiscal was spent behind servicing old debts.

According to Santanu Basu, a professor of economics, this means that the state government is left with little amount to spend behind capital expenditure.

“Lesser spends on account of capital expenditure means lesser asset creation, which means lesser employment generation,” Basu said.

As per the revised estimates of the last state budget, the total accumulated debt of the state government is projected to rise to Rs 5.86 lakh crore as on March 31, 2023, up from Rs 5.28 lakh crore as on March 31, 2022.

To recall, as on March 31, 2011, which was the last financial year under the previous Left Front government, West Bengal’s accumulated debt was little over Rs 1.97 lakh crore.

This means the state’s accumulated debt skyrocketed by around 182 per cent during Trinamool’s tenure.

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