The Gujarat Model – Some Facts
The famous ‘Gujarat Model’ development has been a topic for debate ever since the term was coined in the second half of last decade. While economist Jagdish Bhagwati strongly endorsed the model, Nobel laureate Amartya Sen strongly criticised it and pointed out its basic flaws and has strongly articulated a model which pushes inclusive growth. 
 
Historically, as a state, which was more into trade and commerce because of its geography and arid climate, Gujarat had better growth rate compared to other states, except for a brief period of four years from 1998. 
 
Towards the end of this period, Mr Modi took over as the CM of the state and within two years came the first Vibrant Gujarat Summit. 
 
As per the latest reports, in all the eight editions put together, the Gujarat government has declared that it has signed 51,378 memorandums of understanding (MOU) since the first summit in 2003, worth a whopping Rs84 lakh crore. The government in initial years used to publish the data, but of late no such efforts are made and mere statements are given. 
 
It will be apt to remember, the GDP of India currently stands at nearly Rs170 lakh crore. The government claims, 57% of these signed MOUs are either implemented or under implementation. We have no option but to believe this claim as no concrete data is available in any of the Gujarat government websites including www.vibrantgujarat.com. But they forgot to remove the data from one place, the website of the Commissionerate of Industries, government of Gujarat. It gives an honest picture by putting out the actual data. From 1 January 1983 to 30 September 2016, a total of 6,251 projects were implemented in Gujarat with a cumulative investment of Rs2.76 lakh crore. It generated 10.67 lakh jobs. Further, it states, another 4,033 projects are under implementation with a total investment of Rs951,980 crore, which is projected to generate another 9.30 lakh jobs. Note the stark difference in the generation of employment. In the already implemented projects, every one crore rupees invested generated approximately four jobs whereas the projects under implementation will generate less than one job for every one crore rupees invested!
 
Let us check then how come the Gujarat government is projecting so many MOUs and letters of intent (LOI), which is in stark contrast with the actual figures? This is a very interesting story. 
 
Let us go back to www.vibrantgujarat.com and check the tab, which says approved projects. Approved projects are those, which have signed LOIs and MOUs committing to start a new business in Gujarat with fresh investments. Once opened, a lot of different heads can be seen like urban development, road and railways, etc. Just for a fact check, open the road and railway tab and you will see a lot of construction companies' names with address. I checked one particular company. 
 
Out of curiosity, I went to www.zaubacorp.com and http://www.mca.gov.in/mcafoportal/checkCompanyName.do to check the details of this particular company, which turned out to be a new one (three years old), formed as a subsidiary of an infrastructure development group with a paid up and share capital of Rs5 lakh each. I was wondering what kind of investments a company with such small paid up capital will make in roads and railways. Then this name caught my attention - NHAI. Wow! 
 
NHAI signed an MOU with the Gujarat government! That was the eureka moment. Just visit www.nhai.org and check "establishment" and "vision" to get a clear idea. 
 
National Highway Authority of India-NHAI is the nodal agency, which takes care of the development and maintenance of National Highways. There are two things to be noticed here - a) National Highways are a central government subject under Ministry of Road Transport & Highways and b) NHAI never invests directly in any project. NHAI, once it identifies the area for either re-development or new construction, auctions the project and invites tenders. Technically and financially qualified bidders will get the contract for the construction. 
 
Then how come NHAI signed an MOU with the Gujarat government to invest in the state? The answer is that NHAI is not investing anything. Technically and financially sound engineering construction companies who already won the contract from NHAI after bidding will offload their big projects to small companies like the one mentioned earlier. NHAI gives funds to start a project, called mobilisation advance. With that the sub-contractor starts the work and submits his bills monthly and claim the dues in a stipulated time till the project is finished.  In a nutshell, what the Gujarat government is projecting as investment generated through its much hyped Vibrant Gujarat Summit is a central government funded highway development project, which has nothing to do with either Gujarat government or the Summit. 
 
To clarify the unusually high number of MOUs, let us check one more head - Urban Development. Check the name and details of the companies mentioned. After checking more than 37 companies mentioned and speaking to 14 companies over phone, we can say these are small-time builders who have been asked by officials to sign up MOUs for the small-scale housing or commercial buildings they are developing in their respective localities. One gentleman, requesting anonymity, said almost all the builders in Ahmedabad signed up MOUs, irrespective of the size of the company. And whether they sign up these MOUs or not, that is the business they are into since years! 
 
The state government says all investments came to Gujarat through foreign direct investment (FDI) route. That is what Mr Modi claimed as Gujarat CM, “Gujarat is the growth engine of India, which attracts maximum FDI.” 
 
Let us check that now. The Reserve Bank of India (RBI) and central government data clarify that Gujarat is far behind, in a distant fifth position, much behind Maharashtra, Haryana, Tamil Nadu and Karnataka. This link (http://dipp.nic.in/sites/default/files/india_FDI_June2015_0.pdf) will show the actual amount Gujarat received in 15 years, starting 1 April 2000. Gujarat attracted less than one sixth of FDI than Maharashtra. Let us not forget, in these 15 years, Mr Modi was Gujarat CM for 13 years. 
 
Did you think, most of the investments are made by private companies? A check shows Gujarat is at a distant 4th place. (http://www.mca.gov.in/DataPortal/Ministry/DataPortal/PUC_Provisional_Consolidated_StateWise.xls) (https://data.gov.in/catalog/state-wise-distribution-number-active-companies
 
In gross state domestic product (GSDP) growth, Gujarat stands at 5th position; (http://planningcommission.nic.in/data/datatable/0306/table%20168.pdf
 
Similarly, Gujarat was not in top position since 2004-05 to 2014-15 in GSDP growth rate. (http://niti.gov.in/content/gsdp-constant2004-05prices-percent-growth-2004-05-2014-15)
In case of GDP, with Rs10.94 lakh crore, forget other states, Gujarat is even behind UP. 
 
Gujarat's public debt has grown nearly 3.6 times since 2006 and almost five times since 2001. The State is paying Rs44.15 crore per day as interest on outstanding debt, which is again public money. The latest available data on this is the Government budget document. The total interest outflow (http://financedepartment.gujarat.gov.in/Documents/Bud-Eng_716_2017-2-23_167.pdf) and the interest Gujarat is paying on its debt is one of the highest in the country. Interest payment on public debt as percentage of revenue receipt stands at 14.32% on 2016-17. And total liabilities stands at Rs2.43 lakh crore as on 31 March 2017.
 
Mr Modi had a dream to clean up India when he became Prime Minister. A state in which he was the Chief Minister for more than 13 years stands at 21st place in the country when it comes to in-house latrine facility. Small and poor North Eastern states are much ahead of Mr Modi's home state. Interestingly, all the states where Bharatiya Janata Party (BJP) was in in power for long are lagging much behind. And the states where BJP was in power at some point of time is the worst in this count.
 
A "developed" state like Gujarat has only 53.8% households with a TV. In this case also a couple of smaller and under-developed North Eastern states are ahead of Gujarat, which stands at 19th place in India. (http://niti.gov.in/content/distribution-households-having-assets
 
The same report shows that the state has just 8.8% of population owning a computer or laptop and Gujarat stands at 19th position in the country in this parameter. And the same state stands at 13th place in the number of households, which uses computers or laptops with internet connection. In mobile and fixed line, Gujarat is at 20th place. Fifteen states are ahead of Gujarat when it comes to families owning a car. If one counts the number of families who owns all of the things mentioned here, 18 other states are richer than Gujarat.
 
Developed Gujarat stands at 16th place when it comes to electricity as the primary source of lighting in households. Remember, the three biggest corporate houses have put up massive power plants in the state for which Mr Modi gave them the land at such a price that was never heard of before, besides other tax soaps.
 
It holds 27th place in usage of solar power as primary source of energy for lighting. In usage of Kerosene oil for lighting, still at 14th highest. Gujarat is fifth from the bottom when it comes to no lighting facility at all! See the data here in this link (http://niti.gov.in/content/distribution-households-source-lighting)
 
It holds the 17th place when it comes to the population having their own houses. (http://niti.gov.in/content/ownership-status-households-percent)
 
Literacy rate? A proud 17th place in overall literacy rate (Population of 7-plus age group). And the amazing fact is that in his first 10 years as Chief Minister, Mr Modi managed to bring down the overall literacy rate from 79.31% to 69.14%. About 87% of the male population was literate in 2001. It came down to 79.66%. And females? It fell from 70.73% to 57.8%. A good 12.75% reduction. (http://niti.gov.in/content/literacy-rate-7years)
 
About 112 out of every 1 lakh women die in Gujarat during child birth. (http://niti.gov.in/content/maternal-mortality-ratio-mmr-100000-live-births) Gujarat stands at sixth position out of 20 states, which is not bad. And this is one area they have achieved decent growth. Though the national best is 60, Gujarat brought down MMR from 160 in 2004-06 to 112 in 2011-13. The latest report from the state says it has further gone down to 52. But the authenticity of that report is questioned. (http://niti.gov.in/content/maternal-mortality-ratio-mmr-100000-live-births)
 
But in the case of neo-natal mortality rate (NNMR), Gujarat has a dubious distinction of being 15th out of 20 states from where independent data is available. (http://niti.gov.in/content/neo-natal-mortality-rate-nmr-1000-live-births)
 
Under-5 mortality rate is another area where the state has performed badly. Fifty-two out of every 1000 children born in Gujarat die before reaching their 5th birthday. (http://niti.gov.in/content/under-5-mortality-rate-u-5mr-1000-live-births
 
In the case of female children, Gujarat is a bit better than Chhattisgarh and Jharkhand, at 10th place, but below West Bengal. 
 
Infant Mortality Rate is a very important parameter in HDI ranking. As per the last data available (2013) Gujarat stands at 9th with 36 out of 1,000 live birth. West Bengal Stands at 6th with 31 while Kerala tops the chart with 12. If we divide same parameter gender wise, state has the ratio of 35 and 37 for male and female infants respectively. All India ranking is nine for both category. (http://niti.gov.in/content/infant-mortality-rate-imr-1000-live-births)
 
In sex ratio -- number of females per 1,000 males -- Gujarat had a marginal improvement in 10 years, from 2001-2011, though it is still one of the worst performing states. Overall numbers improved from 918 to 920. That puts the state at 19th position out of 28.
 
Now let us see the performance of the state in sex ratio of children under 5 years -- the number of girl children for every 1000 boys. From 2001 to 2011 Gujarat improved from 883 to 886, 28 numbers below the national average and 5th position from the bottom of 28 states. (http://niti.gov.in/content/sex-ratio-0-6-years-female-children-1000-male-children)
 
Education is an arena where Gujarat government felt it not necessary to spend money. In gross primary school enrolment, Gujarat stands at 22nd position. (http://niti.gov.in/content/gross-enrolment-ratio-primary-level). In upper primary enrolment, Gujarat is 3rd from the bottom (http://niti.gov.in/content/gross-enrolment-ratio-upper-primary-level). The State has one of the worst student - teacher ratios. In primary education, the number of teachers per 1,000 students was 42 in 2001. The Modi government reduced it to 31 by 2011. And the overall student- teacher ratio came down to 29 teachers for every 1,000 students.  (http://gujecostat.gujarat.gov.in/wp-content/uploads/Publication/ser1112e.pdf)
 
Health was a totally neglected sector by Gujarat government under Mr Modi. He never thought of spending money to improve the sector. In fact, Gujarat's allocation for health came down from 4.25% on 1995-00 to 0.77% in 2005-10. (http://wcd.nic.in/sites/default/files/RHS_1.pdf
 
The latest report suggests that Gujarat has severe manpower shortage in government-run rural health systems, whether it is normal physicians or gynaecologists or any other specialised doctors. The same goes with nurses and trained midwives. For example, total specialists needed is 1,280. Out of these, 1206 positions are vacant. Look at any health related parameters in Gujarat and it is one of the worst in the country. (https://data.gov.in/catalog/rural-health-statistics-india-2011
 
Some 44.6% children under 5 are suffering from malnutrition. And 54.9% female population between 15 to 49 years and 40% children under 5 are underweight. 70% are anaemic. Just because the current PM was the CM of the state for 13 years and still Gujarat is at the bottom of the table in these parameters, as per various newspaper reports, government did not publish the data from Gujarat. Select any district of Gujarat once unopened the link and Check to verify yourself. You will see no data at all. (http://niti.gov.in/file/675/download?token=-cWumkeD
 
But we have other sources which shares the actual data of the government. This link will open the latest National Health Survey report of Ministry of Health & Family welfare and gives a clear picture. Immunisation is another area Gujarat is far behind and is one of the states in the mid bottom level of the table.
 
Only 64% of Gujarat population have access to safe drinking water facility. Out of this 64%, 39.9% get tap water from a related source. (http://niti.gov.in/content/distribution-households-availability-drinking-water-facility). This is another sector to which the Gujarat government kept reducing the budgetary allocation over the years.
 
The supposedly most developed state in India is still at 16 out of 22 in the poverty index, with Goa and Kerala topping the chart (http://www.in.undp.org/content/dam/india/docs/MDG%20-%20India%20Report%202014.pdf)
 
Gujarat charged maximum VAT from farmers on agri equipment and fertilizer, started at 4% and later increased by one percent. https://www.commercialtax.gujarat.gov.in/vatwebsite/download/schedule/VAT_Schedule2.pdf
 
Gujarat pays the third lowest wage for agricultural labourers in India. Compare that with what Kerala pays for the same work. For industrial workers 
(http://labourbureau.nic.in/WRRI_JAN13.pdf) and for skilled, semi skilled and unskilled workers too Gujarat pays the lowest.
 
(Ravi Nair can be contacted on twitter @t_d_h_nair
 
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COMMENTS

Aditya Reddy Malipeddi

2 years ago

Regarding literacy rate, the http://niti.gov.in/content/literacy-rate-7years site is provided where the literacy rate of the India in 2011 is mentioned as 64.84 where as in 2001 it is 74.04 (which is quite suspicious i.e literacy rate falling) .
Actually it is the other way around. Please check
1. http://censusindia.gov.in/Census_Data_2001/India_at_glance/literates1.aspx
2. http://censusindia.gov.in/2011-prov-results/data_files/mp/07Literacy.pdf
This essentially invalidates your argument that literacy rate fell in Gujarat during Modi's rule




AS FINANCIALS

2 years ago

These people are the same who joined hand with Sanjay Nirupam who questioned the 'Surgical Strikes' and they say they are honest and biased may their GODs help them and their conscience.

https://www.thequint.com/business/2017/07/05/sucheta-dalal-sanjay-nirupam-launch-tweet-morcha-against-high-bank-rates

REPLY

MDT

In Reply to AS FINANCIALS 2 years ago

Since you had written your comment in English, we assume you can read this as well... https://www.change.org/p/governor-rbi-fi... This shows the movement of common bank customers was supported by even Union Minister Shri Piyush Goyal and MP Shri Kirity Somaiya.

AS FINANCIALS

In Reply to MDT 2 years ago

Ohhhhh so smart MDT, the question is that out of so many people you had that particular 'person' on your stage, shows how low you can fall?
and thanks earlier people did not know through your agenda that the petition was supported by ruling party's MP too. hahahaha

MDT

In Reply to AS FINANCIALS 2 years ago

You have right to not read or understand. The larger issue we took up for all bank customers was supported by all several political leaders, bank union leaders, consumer organisations, trader unions, many of whom were present there during the TweetMorcha. Obviously, you may not know all others, except one person. Anyway, its up to you what to derive from a topic unrelated with this article.

Parthasarathy J

In Reply to AS FINANCIALS 2 years ago

Exactly. Can Sucheta Dalal investigate the investment and revenue model of anti Indian websites SCROLL.IN, THEWIRE.IN, THEQUINT.IN, MONEYLIFE.IN etc.,

saileena sarkar

In Reply to Parthasarathy J 2 years ago

'anti indian' = anti-bjp ruled failed govt? BJP is not India...take your feku patRIOTism elsewhere.

MDT

In Reply to Parthasarathy J 2 years ago

Sorry. We cannot comment about others, like you do. However, on the website, we use Google ads that take care of cost of running it free.

Parthasarathy J

2 years ago

Simply nonsense, in the name of journalism. Suchita, can you refund the money I paid for subscription.

REPLY

Sucheta Dalal

In Reply to Parthasarathy J 2 years ago

Read the rules. If applicable write to the correct email. In any case, 90% of what you get on moneylife online is FREE> This is NOT a part of the subscription.

Parthasarathy J

In Reply to Sucheta Dalal 2 years ago

What rules should I read? It's common sense. What should I write to the correct email id? How does someone give 90% free? Where do you get the resources to provide this for free? And how did you g uarantee that 90% is free, the same statistcs Ravi Nair has used in this article?

MDT

In Reply to Parthasarathy J 2 years ago

Dear Sir,
You had subscribed for the Magazine, which is a paid publication. Kindly read this http://www.moneylife.in/cancellation-refund-policy.html
Thanks

Satyadev Verma

2 years ago

Few years back,in the beginning,Moneylife was unbiased.Not so any more.
Now Moneylife is siding with Ravi Nair(on Congress payroll) & Amartya Sen(a good beneficiary from Congress).I am neutral & independent thinker.
Please answer a simple question if any of you can.
In 1946,Rs 1 was equal to $2. You all know values of the equation 3 years back.
That was the progress made in 67years.
In comparison to that, how do you rate progress in last 3 years ?

REPLY

saileena sarkar

In Reply to Satyadev Verma 2 years ago

everybody not on Modi sarkar payroll is on Congress payroll? vah. 100% employment in India according to you...Lol.if Congress had spent (Adani-Ambani)money on PR,Advertisements & lavish events to scream slogans like BJP, they would not have been in such a state today.

Abhijit Gosavi

In Reply to Satyadev Verma 2 years ago

I think it's very unbiased and provides information that you won't find elsewhere. On this particular article, though, I disagree with the author. But isn't that why we have open discussions? I'm really sorry if my comment caused any issues here, Sucheta. That certainly wasn't my intention. In a free world, people should be able to discuss issues without threats.

By the way, Mr. Verma, do also read the three-part series: http://www.moneylife.in/article/business-schools-learning-a-business-lesson-part-1/50991.html This is the sort of material you won't find elsewhere.

Chanchal

In Reply to Satyadev Verma 2 years ago

Peace Satyadev ! Kindly try to digest the fact even if it comes from opposition.Remember Ram asked Lakhsman to get wisdom from Ravan.

Satyadev Verma

In Reply to Chanchal 2 years ago

I m at perfect peace.I have put up a question.
Let Moneylife/Ravi Nair/Amartya Sen answer.
Moneylife is no more an unbiased organisation.
It seems to b a paid agency.

Sucheta Dalal

In Reply to Satyadev Verma 2 years ago

Paid by whom Satyadev? Because we want our readers heads not to be blocked and coloured by one-sided views?

Rahul Pande

2 years ago

Courageous Ravi.Wonder whether social media and whatsapp have lynch mobs have started their tirade or not.

Abhijit Gosavi

2 years ago

Kerala gets money from the Middle East, while Goa generates money from tourism. In both cases, the weak Indian currency helps. So I'm not sure that's an apples-to-apples comparison.

As far as ease of doing business goes, Gujarat is even ahead of Maha (have firsthand info. of this from real human beings working in industry), which generates the most tax revenues for the central govt.

And one more thing: you should compare Gujarat to Bengal to study how two diametrically opposed economic philosophies deliver. I recently visited Bengal (three times in two years). Most industries have disappeared from there; no new jobs are being created, and many are fleeing to states like Maha! The Hazra Road, a long and prominent road of South Kolkata, has become a garbage dump from one end to the other. There are hardly any footpaths on it, and those that exist are full of excreta of humans and animals. The amount of filth everywhere in Kolkata is mind-boggling; plus, it has increased exponentially. The fresh food markets (I visited Lansdowne Market and Jadu Bazar) stink even more than they used to. The Gariahat area looks like war-ravaged territory. These award-winning profs from the West (one of whom you cite) come up with fantastic theories, but never try to test the ground realities of even the places they frequently visit? How sad is that?

REPLY

Swapan Roy

In Reply to Abhijit Gosavi 2 years ago

The writer is explaining about the ground reality of gujrat model,not of your visit to kolkata and your experience of city areas.

Vivek Naik

In Reply to Swapan Roy 2 years ago

:D

Abhijit Gosavi

In Reply to Swapan Roy 2 years ago

It appears that this author has no understanding of ground realities, otherwise, he would not have written what he's written. I remember a communist Finance minister from Bengal claiming on the basis of data that the economic and health parameters of the USA were worse than those of Cuba, yes Cuba :)

Swapan Roy

In Reply to Abhijit Gosavi 2 years ago

The matter is not related here.,if u have counter view u r free to do so.

Manoj Kumar

2 years ago

Facts do not impress Modi bhakts, but Whatsapp stories do.

Somit Mukherjee

2 years ago

Money life has become a Modi baiters' paradise and has completely lost its objectivity. So sad that this site/magazine is losing its erstwhile standards . We continue to stand with Gujarat and with Modi !!

REPLY

Kunal Singh

In Reply to Somit Mukherjee 2 years ago

Truth Prevails! Facts must be hurtful.

RAVI RAM PV

2 years ago

This stale topic has been flogged for years by Modi-baiters like Rajdeep Sardesai et al. That this person has serious issues with Modi is obvious. That I can understand, as one is entitled to one's own opinions. But, is MoneyLife becoming a platform for airing grievances against Modi?
I cast a cursory glance at this article, one thing that the author claims reg giving away land to power companies at "[sic]unheard of prices". He obviously has zero idea of where the plants have come up and the value of those lands prior to the power projects.

Request to Moneylife Digital Team:
I buy Moneylife, not politically loaded bullshit. Stick to your core philosophy. These grossly biased political views are a waste of bytes/space. Pl. stop publishing crap.

REPLY

Vijay raman

In Reply to RAVI RAM PV 2 years ago

Please point of where do you have a doubt about the facts provided. In fact it is you who is showing your bias by not pointing out a single fact of your own or a single fact you contest with counter evidence.

The article is giving links to government sites. Where is the problem with that. An eye opener article.

Bhuvaneswaran K

2 years ago

hmm... but I cannot choose Pappu.. ;) So, will have to vote Modi again ;)

REPLY

Gupta

In Reply to Bhuvaneswaran K 2 years ago

The best reply... completely agree! :-)

Anand Vaidya

2 years ago

See Ravi Nair's profile & tweets. You can connect with this article easily. I mean his biases

REPLY

Vivek Naik

In Reply to Anand Vaidya 2 years ago

just check your own profile as well

Jivan Khot

2 years ago

Seems like one sided assessment looking at just the -ve aspects. There is no mention of any single achievement. To win so popularly on the basis of Gujarat model without having any substance, he should magician :-) Overall assessment would have been better rather than just what did not happen.

REPLY

Ravindra Shetye

In Reply to Jivan Khot 2 years ago

Where is the other side? The one presented by the Govt of Gujarat? In fact that is what has been exposed in this article.

Krishnaraj

2 years ago

Not to mention bankrupting GSPC with Dr Hasmukh Adhia and Dr Urjit Patel as Independent Directors, raking up Rs 23,000 crores in loans; a promise of 4 - 8 lakh crore of gas, not even 0.01 basis point of that came about. On verge of default but merged with ONGC.

Glad that Moneylife finally is bold enough to speak out

SuchindranathAiyerS

2 years ago

Exaggeration is a sure death knell to credibility. I learned young in trying to impress demanding teachers and family elders.

RBI might take up NPAs worth Rs 8 lakh crore for resolution by 2019: Assocham
New Delhi, Industry body Assocham on Sunday said the Banking Regulation (Amendment) Ordinance has empowered the Reserve Bank of India (RBI) to take up "bad loans worth about Rs 8 lakh crore" for resolution by March 2019.
 
According to an Assocham study, the move has the potential to bring down the non-performing asset (NPA) levels and "significantly improve" the financial health of banks.
 
"Somewhat bitter medicine came in the form of the Ordinance promulgated by the President in May," Assocham's Secretary General D.S. Rawat said.
 
"The government gave wide-ranging legislative powers to the RBI to issue directions to lenders to initiate insolvency proceedings for the recovery of bad loans that have reached unacceptably high levels."
 
In case of a default, the recent Ordinance has authorises RBI to direct lenders for initiating insolvency resolution process under the provisions of the Insolvency and Bankruptcy Code (IBC), 2016.
 
Further, the law empowers the RBI to set up sector related oversight panels that "will shield bankers" from any action which might be initiated by probe agencies on a later date.
 
In the past, lenders have been reluctant to resolve NPAs through settlement schemes or to "sell bad loans with hair cuts" to asset reconstruction companies for fear of probe agencies. 
 
"With the institution of OC (overseeing committee), the top bankers should get some cushion against the 3Cs (CBI, CAG and CVC), since the key decisions which involve taking losses by the banks, would be taken by an institutional mechanism and not one or few individuals," said Assocham's study titled "NPAs Resolution: Light at the end of tunnel by March 2019". 
 
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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States’ finances deteriorating, says SBI report
Out of the major 17 non-special category states in India, there were only eight states that satisfied the necessary conditions (NC) and at least one of the sufficient conditions (SC), to become eligible for additional borrowing in FY17-18. However, even these states may find it difficult to mobilise resources due to deteriorating finances, says a research report.
 
In the note, State Bank of India (SBI) says, "...the worrying thing is that even states that are eligible for additional borrowing in current fiscal have recently witnessed deterioration in fiscal deficit. This indicates there is pressure on even the well-off states for mobilising resources. Hopefully, the introduction of goods and services tax (GST) could provide a fiscal buoyancy to states."
 
 
"States who have recently waived farm loan will find it difficult to raise funds without market borrowing in financing additional burden”, the report says, adding, "In this context, we estimate that while Karnataka have the luxury of mobilizing the entire debt waiver amount through market borrowings or non-tax revenue, Maharashtra is also well placed as it can even mobilise Rs11,000 crore from non-tax revenues, and the remaining Rs19,000 crore from borrowings."
 
Market borrowing being the major instrument of financing budgetary deficit, states that have recently waived farm loan will find it difficult to raise funds without market borrowing.
 
As per the Fourteenth Finance Commission Recommendations, all states are required to maintain fiscal deficit of 3% of their gross state domestic product (GSDP) annually for the period 2015-16 to 2019-20. Additional relaxation will be given for market borrowing only to those states that are compliant with both necessary and sufficient criteria of fiscal prudence prescribed by the Commission.
 
The Necessary Condition (NC) is that the States should have zero revenue deficit in the year for which the borrowing limit has to be fixed and in the immediate preceding year. The Sufficient Condition (SC) is that the States’ debt-GSDP ratio should be less than or equal to 25% in the preceding year and interest payment and revenue receipts (IP/RR) should be less than or equal to 10% in the preceding year. States meeting one or both of the above criteria are allowed a relaxation in their fiscal deficit targets by 0.25% or 0.50% of GSDP, provided they meet the Necessary Condition.
 
Additionally, if a State is not able to fully utilise its sanctioned borrowing limit of 3% of GSDP in any particular year during the first four years of award period (2015-19), it will have the option of availing the un-utilised borrowing amount only in the following year but within the award period.
 
Out of the eight states that satisfy the NC and at least one SC, seven states -- Bihar, Chhattisgarh, Jharkhand, Karnataka, Madhya Pradesh, Odisha, and Telangana – have satisfied both the SCs along with NC and are eligible to have a maximum gross fiscal deļ¬cit (GFD)/GSDP ratio of 3.50% while Gujarat is the only state to satisfy one of the SCs, becoming eligible to have a maximum GFD/GSDP ratio of 3.25% in 2017-18.
 
 
SBI says that if last year's Budgetary Estimate (BE) and their Revised Estimate (RE) of fiscal deficit are compared, eight states have revised their target upwards. This year, servicing of UDAY bonds, farm loan waiver and implementation of Seventh Pay recommendation will put additional pressure on the fiscal position of states, making it difficult to achieve their budgetary target, SBI concluded.

 

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COMMENTS

SuchindranathAiyerS

2 years ago

This despite cheating us in every possible way. From inlfated electiricty bills, making us pay for garbage and sewage and then employ private contractors to do work that we paid Government for, having to pay hospitals and schools for poor quality substitutes for services that were free and superb until 1947 and so on. This, and inflation is due to Government profligacy , reservations and extortion-corruption.Sack 75% of Government pay roll and make the rest walk to and from their offices and work for a living. Lynch them if they do not.

As for State Bank, their finances are no better, and all the unconscionable charges that they are hitting innocent citizens with to feed themselves and the their Neta-Babu overlords will vanish like the States' taxes. In smoke.

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