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Annual plan chart

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  • 1. Resource Mobilization for State Plan By S.Subramanya Secretary ( Budget & Resources) Government of Karnataka
  • 2. Presentation Plan
    • Concept of government Finances
    • How availability of resources for Plan are estimated?
    • Karnataka Fiscal Responsibility Legislation and imposition of restrictions.
    • Estimation of resources for 11 th plan
  • 3. Part 1 Concept of Government Finances
  • 4. 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
  • 5. 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
  • 6. 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
  • 7. Why should there be no Revenue Deficit
    • Revenue Deficit implies that the Revenue Expenditure of the State is greater than the Revenue Receipts.
    • The State borrows to meet even the current expenditure
    • Basic Principle: borrowings should never fund current expenditure but should be used only for Capital Expenditure
    • Growth depends on the Savings made by Household Sector and Public Sector,
    • Revenue Deficit indicates the extent to which State Government eats into the household and private savings to meet its current expenditure – RD is detrimental for growth
    • For growth, even government should generate (revenue) surplus and use it for capital expenditure
  • 8. Why should Fiscal Deficit be restricted?
    • 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
  • 9. Part 2 How availability of resources for Plan are estimated?
  • 10. 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
  • 11. Part 3 Karnataka Fiscal Responsibility Legislation and imposition of restrictions.
  • 12. Fiscal Legislations
    • Karnataka Fiscal Responsibility Act
      • (Consolidated) Revenue Deficit to be eliminated
      • Fiscal Deficit to be limited to 3% of GSDP
      • Any additionality should be offset by saving elsewhere or additional resources within above parameters
    • Karnataka Ceiling on Government Guarantees Act
      • Outstanding Guarantees to be limited to 80% of the Revenue Receipts of one year prior to previous year
  • 13. Trends in Fiscal Deficit
  • 14. Trends in Revenue Receipts and Expenditure
  • 15. Result of Fiscal correction
    • 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.
  • 16. Ability of the State in Financing the annual plans
  • 17. Post Fiscal reforms challenges
    • Conserving revenue streams.
    • Ensuring efficiency in expenditure.
    • Increasing allocation of resources to the social sectors like health and education, social welfare and infrastructure development.
    • Targeting of subsidies and reducing non targeted subsidies.
    • Promoting capital formation for durable growth.
  • 18. Part 4 Estimation of resources for 11 th plan