Economy
States' rising debt, non-plan spending worries central bank
Kolkata : Non-productive expenditure of state governments remain a cause for worry and their growing liabilities need redressal, even though there has been some improvement in this regard, the Reserve Bank of India (RBI) has said in a report.
 
"The rising trend in the committed expenditure to gross state domestic product ratio in recent years is a cause for concern," the central bank said in its latest report on state finances, calling for steps to step up the output.
 
Committed expenditure includes interest payment, pensions and administrative services and is set to rise further upon the implementation of the 7th Central Pay Commission recommendations, which may also have a cascading impact on the salaries and pension burdens on states, the RBI said.
 
Such expenditure is a major fiscal drain on states and inhibit money for development purposes.
 
The report said one solution is for states to expand faster than the rate at which such expenses are growing. "Capital outlay must go up significantly. But states are not able to step it up dramatically," Ajitava Raychaudhuri, economist at Jadavpur University, told IANS.
 
According to the report, states in general raised the average capital outlay to their output by 0.6 percentage points after implementing the steps under fiscal responsibility and budget management from 1.8 percent to 2.4 percent.
 
"But this is not a significant increase," Raychaudhuri said.
 
The report said aggregate capital expenditure of states remained almost stagnant over the years as a proportion to the state output. The banking regulator also said states do not sacrifice growth-inducing expenditures within the overall framework of fiscal consolidation.
 
"Every state has its own comparative advantage. Each state should identify and develop them via its own resources or public-private partnership. This will create more assets and ensure future flow of income," Dipankar Dasgupta, economist at Indian Statistical Institute told IANS.
 
He said tourism was one such area for West Bengal to create productive assets.
 
Economists said unless states increase their income, they will continue to rely on borrowings and that again will be used to retire old debt. As a result, debt burden only grows without any sign of increases in the states' gross domestic product or incomes.
 
"Governance is deteriorating. There is lack of accountability in the system. Someone must oversee states for their unproductive expenditure. Most financing decisions are for political gains," former professor of Delhi School of Economics B.L Pandit told IANS.
 
"Capital expenditure has multiplier effect on growth. But states are unable to increase it enough to push growth to a higher level. Majority of borrowed money is spent neither efficiently nor on productive purposes. So the debt burden of the states has not reduced much," Pandit added.
 
The central bank said outstanding liabilities of state governments have experienced double-digit expansion since 2012-13, with steady increase in public debt. "The increase in market borrowings of state governments since 2008-09 entails large repayment obligations from 2017-18 onward."
 
As on end-March 2016, the outstanding liabilities of West Bengal, for example, stood at Rs.3,088 billion, while for Maharashtra it was Rs.3,793.6 billion. For Uttar Pradesh, it was Rs.3,274.7 billion, Tamil Nadu Rs.2,352.6 billion and Gujarat Rs.2,292.8 billion.
 
Nonetheless, West Bengal's debt as percentage of its output improved to 35.5 percent in 2015 from 41.9 percent in 2011. As a non-special category state, it is the worst. For Punjab, the ratio improved to 32.4 percent from 33.1 percent, and for Kerala to 28.5 percent from 31.8 percent.
 
At the same time, the report said the fiscal health of states deteriorated in 2013-14 with their consolidated revenues turning into deficit after three years. It further weakened in 2014-15, as gross fiscal deficit and primary deficit also increased as proportions to state output.
 
But the central bank had a ray of hope. "The overall fiscal performance of states is expected to improve with the revenue account turning back to surplus. Such improvement, if sustained, would reduce the debt burden of states."
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Diesel, petrol cabs go off roads, owners warn of suicides
New Delhi : The Supreme Court's ban on plying of diesel and petrol driven taxis in Delhi took effect on Sunday, with three taxi owners warning this might lead to suicides in frustration.
 
Cab operators termed the apex court's decision tyrannical, saying if the decision was not changed then it will lead many of them to commit suicide. Over 27,000 taxis run on diesel alone in Delhi.
 
The cab operators told IANS that they had decided to launch a protest after mutual consultations. They claimed that almost half the taxis were run on diesel in the national capital.
 
"I have cancelled 17 bookings since morning as most of my taxis are run on diesel. I have only five taxis run by CNG. We do not understand why the court and Government come up with such decisions?" S. Kumar, owner of Kumar Taxi Services in central Delhi, told IANS. 
 
He said the apex court decision of Saturday will lead many taxi operators to commit suicide as they won't be able to pay their car instalments now.
 
"How do we pay our monthly instalments to banks for the loans taken to buy taxis? Does not the government realize that diesel cars can't be converted into CNG?"
 
The Supreme Court on Saturday refused to give more time to taxi operators to switch to the cleaner compressed natural gas (CNG). The deadline for the change, which had been extended twice, was Saturday.
 
Another transporter, who did not wished to be named, told IANS: "The order would have at least made sense if it was applicable to diesel taxis after their ongoing permit got over. That would have at least given some time to the operators to arrange for alternate taxis. But now we are all ruined."
 
According to the Delhi transport department, about 60,000 taxis are registered in the city. Of them, 27,000 run on diesel.
 
Some taxi operators believe the court ruling will mainly affect cab aggregators Ola and Uber.
 
"The decision is not applicable to taxis with All India Tourist Permit. This is going to be a setback for Ola and Uber who have a large number of taxis run on diesel," Raman of Kamal Taxi Service told IANS.
 
"The authorities should not be surprised if taxi owners and drivers commit suicide in sheer frustration," Raman added.
 
Pritpal Singh, a taxi owner in south Delhi, that even taxis with all-India permits often plied within the capital when there was no business for journeys outside. "So even they will be hit. We don't know what to do."
 
On Sunday, with taxis plying on petrol and diesel staying off the roads, commuters switched over to the limited number of CNG-driven yellow-top taxis and auto-rickshaws. The problem is expected to peak on Monday.
 
"I called two taxi companies but declined to take my booking citing lack of CNG cabs. Finally I took an auto-rickshaw to reach Noida Sector 15," Sangeeta Johari, a stock broker, told IANS.
 
Piyush, working with a NGO, told IANS that he waited for two hours to get his taxi booked.
 
"I was initially told there are no cabs. Later, they said a taxi will be available but in two hours. I had no option and to wait," he said.
 
This is the second blow to Uber and Ola in Delhi. The Delhi government has declared that it will not let them charge "surge pricing".
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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India can save $50 bn in logistics costs: Report
New Delhi : India can save up to $50 billion by bringing down logistics costs to 9 percent from the current 14 percent of the country's GDP, according to a joint study by industry chamber Assocham and Resurgent India released on Sunday.
 
"India can save up to $50 billion if logistics costs are brought down from 14 percent to nine percent of country's gross domestic product (GDP) thereby making domestic goods more competitive in global markets," the Associated Chambers of Commerce and Industry of India (Assocham) said in a release here.
 
"With expected inflow of new investments owing to government's thrust on promoting domestic manufacturing sector, India's cargo and logistics industry is likely to clock a compounded annual growth rate of about 16 percent during the course of next few years," the study - Cargo and Logistics Industry in India - said.
 
Growth in logistics sector would imply improved service delivery and customer satisfaction, leading to growth in exports of Indian goods and potential to create job opportunities, it added.
 
"Appropriate policy changes and opening up capacity together with increase in speed for transportation of goods and services through various modes, namely rail, road, water and others is imperative for the growth of cargo and logistics industry in India," Assocham secretary general D.S. Rawat said in the statement.
 
"Transportation of bulk commodities through waterways can free up capacity for fast moving goods, besides, setting benchmarks and standards for industry will drive uniformity of warehouses, storage and transport equipment," he added.
 
The report said the Make in India campaign will see investments connect the country to global production networks that would generate new business for logistics thereby making it an attractive location to do business as compared to other regions in the world.
 
The government should create a uniform tax structure and do away with multiple checkpoints and documentation requirements which would lead to speedier delivery of cargo, it added.
 
In this connection, the study emphasised that passage of the constitutional amendment bill on the Goods and Services Tax (GST) in parliament will further improve the logistics sectors performance by bringing down distribution costs by up to 15 percent.
 
This landmark bill to reform India's indirect tax regime has been passed by the Lok Sabha, but is stalled in the Rajya Sabha where the ruling National democratic Alliance currently lacks a majority.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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