
State Assembly elections: It will be election time in four states later this year. It is likely that the political party in power and the Opposition will offer some freebies to attract the voters. Something very similar was seen in the recently-concluded Karnataka elections.
The five schemes that the Congress guaranteed it would implement in Karnataka are 'Gruha Jyothi' -- to provide 200 units of electricity free to every household; 'Gruha Lakshmi' -- to grant Rs 2,000 to every woman head of a family; 'Anna Bhagya' -- to distribute 10 kg rice to every member of BPL families every month; 'Yuva Nidhi' -- to sanction Rs 3,000 dole to unemployed graduates and Rs 1,500 to unemployed diploma holders for two years (in the 18-25 age-group); and 'Shakti' -- to enable free travel for women across Karnataka in state buses.
Madhya Pradesh, Rajasthan, Chhattisgarh, and Telangana are four poll-bound states that will be readying for assembly polls this year. What is the fiscal situation of these four states? Will they be able to offer freebies?
To analyse the financial health of these four states, BT Research Bureau has compiled a list of key parameters like the size of the economy, per capita income, state debt, tax revenue, capital expenditure, and fiscal deficit data. Here's what we know.
Gross State Domestic Product (GSDP)
According to the data available on the Reserve Bank of India (RBI) website, budget and economic surveys of these states show that at the current prices Rajasthan, with a GSDP of Rs 14.13 lakh crore in FY23, is the biggest economy among these four states, followed by Telangana at Rs 13.27 lakh crore, Madhya Pradesh's GSDP stands at Rs 13.23 lakh crore and Chhattisgarh's at Rs 4.38 lakh crore.
Capital Expenditure (Capex)
Setting up of schools, colleges, hospitals, bridges, roads, airports, etc are considered as capex of the government. Madhya Pradesh, with capex of Rs 45,685 crore in FY23, which is 18.4 per cent of the state’s total expenditure, is the top performer in this list followed by Chhattisgarh at Rs 15,241 crore (14.7 per cent share of total expenditure), Telangana's capex of Rs 29,728 crore is 11.6 per cent of its total expenditure, while and Rajasthan's capex stands at Rs 24,152 crore, which is 10.3 per cent of its total expenditure. A higher capex indicates that the state can do higher developmental work.
Per capita income
Per capita income is a better indicator of a state’s wealth than GSDP as it adjusts the population of that state. Telangana, with Rs 3.17 lakh, is the richest state in this list, followed by Rajasthan at Rs 1.56 lakh, Madhya Pradesh at Rs 1.41 lakh, and Chhattisgarh has the lowest per capita income of Rs 1.34 lakh in FY23.
Revenue receipts
Madhya Pradesh has the highest revenues at Rs 1,95,179 crore followed by Telangana at Rs 1,93,029 crore, Rajasthan at Rs 1,83,920 crore and Chhattisgarh had Rs 89,073-crore revenue for FY23.
Debt-to-GSDP ratio
Chhattisgarh has the lowest debt when compared with state GDP as the debt-to-GSDP ratio is 17.9 per cent, followed by Telangana (24.7 per cent), Madhya Pradesh (26.3 per cent), and Rajasthan has highest debt among the four states with its debt-to-GSDP ratio at 38 per cent. A higher debt-to-GSDP ratio is not good for the financial health of a state as very less resources are left for developmental projects in that state after paying interest and loans.
Fiscal deficit
Fiscal deficit arises when the expenditure of a government is more than its revenues and to manage this gap the government has to take a loan. Of the four states that are going for elections soon, Chhattisgarh has the lowest fiscal deficit of Rs 14,600 crore, which is 3.33 per cent of its GSDP, followed by Telangana with a fiscal deficit of Rs 52,167 crore (3.93 per cent of its GSDP), Madhya Pradesh has a fiscal deficit of Rs 52,511 crore (4 per cent of its GSDP) and at the bottom is Rajasthan having fiscal deficit of Rs 58,212 crore (4.12 per cent of its GSDP).
Committed expenditure (2018-21 average)
Committed expenditure as a percentage of revenue receipts includes expenditure on salaries and wages, pensions, and interest payments. Increased allocation to committed expenditures reduces fiscal space for other development expenditures. Madhya Pradesh leads this list as its committed expenditure is lowest (42.1 per cent), while Chhattisgarh, Telangana, and Rajasthan have committed expenditures of 46.3 per cent, 48.6 per cent and 69.2 per cent, respectively.
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