Government Finances Debt Consolidated Fund CF Public Account Revenue Deficit Fiscal Deficit Revenue Account Capital Account Revenue Expenditure Capital Expenditure Expenditure Tax Non Tax GoI Grants Receipts Devolution Non Debt Capital Receipts
Revenue Surplus – not equivalent to accumulation of profit or cash State Debt Revenue Expenditure Capital Expenditure Revenue Receipts Fiscal Deficit The State erodes into the savings made by the household and private sector to fund its current expenditure thereby reducing the net savings in the economy and thus hampering growth Receipts Expenditure Revenue Deficit This portion of fiscal deficit is being used to fund Revenue Expenditure
Revenue Surplus – not equivalent to accumulation of profit or cash The State generates savings in the public sector adding to the net savings in the economy augmenting the savings of household sectors and by using this surplus to fund capital expenditure stimulating growth State Debt Revenue Expenditure Capital Expenditure Revenue Receipts Fiscal Deficit Receipts Expenditure This Revenue Surplus goes into funding the extra capital expenditure Revenue Surplus
Fiscal deficit is the difference between the total expenditure and the non-debt receipts which is met by borrowings
Fiscal Deficit per se is not bad provided
It is kept within a sustainable limit
There is no revenue component
Excessive fiscal deficit implies more borrowings leading to higher interest payments which would crowd out development expenditure in future
Fiscal Deficit causes intergenerational inequity and thus governments need to be cautious
Part 2 How availability of resources for Plan are estimated?
Provident Fund Small Savings Market Borrowings Negotiated Loans SOTR SONTR Devolution Non-Plan Grants + Non Plan Non Devlp Exp Non Plan Devlp Exp + - Balance of Current Revenues Non-Plan Capital Receipts Non-Plan Capital Expenditure - Miscellaneous Capital Receipts IR EBR + IEBR NCA ACA for EAPs Other ACA Central Assistance to State Plan + Financial Resources for Annual Plan
Part 3 Karnataka Fiscal Responsibility Legislation and imposition of restrictions.
Revenue deficits have been eliminated. Fiscal deficit is contained with in 3 % of GSDP.
Debt stock is less than 33% of GSDP. Interest payments are less than 14 % of TRR. Expenditure on salary and pension is less than 30% of TRR.
Expenditure on capital formation has increased. Revenue surplus is being utilized for capital formation.
The state has received the fiscal Incentive facility provided by the 11 th Finance commission. The benefit of Debt consolidation and debt waiver announced by the 12 th Finance Commission has also been provided by GOI.
Ability of the State in Financing the annual plans