Budget Analysis

Rajasthan Budget 20122012-13

Chief Minister Ashok Gehlot presented the General Budget 2012-13 to the State Assembly on 26th of March, 2012. In his address, he commented on the fiscal performance of the State in 2011-12 and laid out his budget proposals for 2012-13. This document presents a brief analysis of the Budget. It contains the following: Budget highlights Key financial indicators Revenue analysis Expenditure analysis (budgeted expenditure by sector)

Explanations to technical terms used in the Budget are provided as boxed sections in relevant parts of the document.

Budget Highlights
- Budget estimates for 2012-13 project revenue receipts increasing to Rs. 63,147 crore, from Rs 56,121 crore in 2011-12. - The government is estimated to generate a revenue surplus of Rs. 443 crore in the closing year. In 2012-13, this surplus is estimated to increase to Rs. 927 crore. - Revised estimates indicate that the government bettered its fiscal deficit target by Rs. 376 crore. For 2011-12, fiscal deficit as a percentage of state GDP is now estimated at 2.09%. In 2012-13, the fiscal deficit is estimated to be 2.14%. - Borrowings and other liabilities continue to remain the main source of capital receipts; Rs. 13,766 crore is estimated to be borrowed in 2012-13. This consists of Rs. 11,229 crore of internal debt, 1,261 crore as loans from the central government and Rs. 1276 from the public account. - The total outstanding liability of the state for 2011-12 is estimated to equal 29.06% of state GDP. In 2012-13, this is estimated to reduce to 28.65%. - The government is estimated to spend Rs. 22,178 crore on Economic Services in 2012-13, which includes Rs. 9,667 crore on Irrigation and Rs. 4,897 crore on Rural Development.

Key financial indicators

Budget data is usually presented in tabular form with four key columns: Budget Estimates for the current year, Budget Estimates and Revised Estimates for the previous year, and Actuals for the year before that. Thus, each table presents information for the current year and the previous two years. Revenue v/s Capital account One way to analyze the budget is to look at the revenue and capital account. Table 1 presents this information. (Please read Box I & II for an explanation of the technical terms used in the table).
Box I: How are receipts and expenditure classified? In the table below, receipts have been classified as revenue and capital receipts. Receipts from sources such as taxation, dividends from companies owned by the government and user charges on public services are classified as revenue receipts. Receipts from sources such as borrowing and disinvestment of public sector companies are classified as capital receipts. Capital receipts reduce assets or increase liabilities.
Analyst: Karan Malik (karan@prsindia.org) Coordinator: Anil Nair (anil@prsindia.org, 9871916608)
PRS Legislative Research Centre for Policy Research Dharma Marg Chanakyapuri Tel: (011) 2410 6720, (011) 2611 5273-76, Fax: 2687 2746 www.prsindia.org New Delhi 110021

March 28, 2012

Budget Analysis: Rajasthan 2012-13

PRS Legislative Research

Expenditure has been categorized as revenue and capital expenditure. Capital expenditure is used to create assets or to reduce liabilities e.g. building a road, repaying a loan. Revenue expenditure is used on items such as salaries and administrative expenses. Box II: What is revenue deficit/ surplus? A revenue deficit is incurred when the governments revenue expenditure exceeds its revenue receipts. This implies that the government is dis-saving. It means that the government will have to borrow not only to finance its investment but also its consumption. This will lead to an increase in debt and interest liabilities, and could force the government, eventually, to cut expenditure. In case receipts exceed expenditure, the government generates a revenue surplus.

Table 1: Analysis of revenue and capital account (Rs. Crore)

Actuals (2010-11) Total Receipts (a +b) Total Revenue Receipts (a) Total Capital Receipts (b) Total Expenditure (c + d) Total Revenue Expenditure (c) Total Capital Expenditure (d) Revenue Surplus (Total Rev. Receipts Total Rev. Exp.) 54,250 45,928 8,322 53,703 44,873 8,830 1,055 Budget Estimates (2011-12) 64,098 52,287 11,811 63,999 51,935 12,064 352 Revised Estimates (2011-12) (A) 68,592 56,121 12,471 68,530 55,678 12,852 443 Budget Estimates (2012-13) (B) 77,072 63,147 13,925 76,675 62,219 14,456 928 % Change over last year (B-A)/(A) 12% 13% 12% 12% 12% 12% 109%

Observations: - In the previous year (2011-12), the government had estimated a surplus of Rs. 352 crore. However, revised estimates indicate that a surplus of Rs. 443 crore may be generated. In 201213, the surplus is estimated to increase to Rs. 927 crore, an increase of 109% over the revised estimates for 2011-12. - In the coming year, the government has earmarked Rs. 14,456 crore (or 19% of total expenditure) as capital expenditure. This is same as the percentage earmarked last year. Break-up of receipts and expenditure Table 2 gives a break-up of receipts by source. It also splits expenditure into Plan and Non-plan.
Box III: How else is expenditure classified? Government expenditure is also classified as Plan and Non-plan. Plan expenditure covers expenditure on schemes and projects covered by the five-year Plans. Non-plan expenditure is expenditure not covered by the Plans and includes items such as interest payments on government debt, expenditure on police, and even maintenance of existing government establishments such as schools and hospitals. Box IV: What is fiscal deficit? Fiscal Deficit = (Total receipts excluding borrowing) - Total expenditure The excess of total government expenditure over total receipts is called the fiscal deficit. It is an indication of the total borrowings needed by the government. Fiscal deficit may occur either due to a revenue deficit and/ or due to some capital expenditure undertaken by the government.

Budget Analysis: Rajasthan 2012-13

PRS Legislative Research

Table 2: Budget at a glance (Rs. Crore)

Actuals (2010-11) Receipts Total Receipts (a + b) Total Revenue Receipts (a) Tax Revenue Non Tax Revenue Share of Central Taxes Grants-in-aid Total Capital Receipts (b) Borrowings and other liabilities Recoveries of Loans Miscellaneous Expenditure Total Expenditure (c +d + e) Total non-plan expenditure (c) Total plan expenditure (d) Centrally Sponsored Schemes (e) Fiscal Deficit Fiscal Deficit (% of State GDP) 53,703 39,531 12,059 2,113 -4,126 63,999 44,713 16,587 2,699 -8,063 2.19% 68,530 45,734 20,167 2,629 -7,687 2.09% 76,675 52,847 20,987 2,842 -8,651 2.14% 12% 16% 4% 8% 13% 54,250 45,928 20,758 6,294 12,856 6,020 8,322 7,990 318 13 64,098 52,287 21,349 6,438 15,444 9,056 11,811 11,637 168 6 68,592 56,121 24,227 8,658 14,977 8,259 12,471 11,240 1,218 14 77,072 63,147 26,832 8,951 17,707 9,657 13,925 13,766 151 8 12% 13% 11% 3% 18% 17% 12% 22% -88% -43% Budget Estimates Revised Estimates (2011-12) (2011-12) (A) Budget Estimates (2012-13) (B) % Change over last year (B-A)/(A)

Observations: - Revised estimates indicate that the government bettered its fiscal deficit target by Rs. 376 crore. For 2011-12, fiscal deficit as a percentage of state GDP is now estimated at 2.09%. This is in line with the targets laid down under the Rajasthan Fiscal Responsibility and Budget Management (FRBM) Act, 2005. Under this Act, the state government was required to bring the fiscal deficit below 3% of state GDP by 2011-12. - As a percentage of state GDP, fiscal deficit is estimated to be 2.14% in 2012-13. - In the case of Rajasthan, state taxes contribute the maximum to the state exchequer. In 2012-13, these taxes are estimated to contribute Rs. 26,832 crore or 42% of the total revenue receipts. - Borrowings and other liabilities continue to remain the main source of capital receipts; Rs. 13,766 crore is estimated to be borrowed in 2012-13. This consists of Rs. 11,229 crore of internal debt, 1,261 crore as loans from the central government and Rs. 1,276 from the public account. - It is estimated that Rs. 52,847 crore (69% of total expenditure) will be spent on non-plan items in 2012-13. As explained above, non-plan expenditure includes items such as interest payments on government debt, expenditure on police, and even maintenance of existing government establishments such as schools and hospitals.

Budget Analysis: Rajasthan 2012-13

PRS Legislative Research

Debt position When a government spends more than it collects by way of revenue, it incurs a deficit. The Rajasthan FRBM Act, 2005 is a measure to regulate the build up of debt. It does so by setting upper limits on state revenue and fiscal deficits. Under the Act, the state is required to restrict its total outstanding liability to 39.3% of state GDP in 2011-12 and 38.3% in 2012-13. Table 3: Debt position and interest payments
Budget Estimates (2011-12) Total Outstanding Liability (% of State GDP) Interest Payments (Rs. crore) 29.08% 8,012 Revised Estimates (2011-12) 29.06% 7,890 Budget Estimates (2012-13) 28.65% 8,316

Observations: - The total outstanding liability of the state for 2011-12 is estimated to equal 29.06% of state GDP. In 2012-13, this is estimated to reduce to 28.65%. - In 2012-13, Rs. 8,316 crore or 13% of total revenue receipts will go towards interest payments.

Revenue analysis
Of the various sources of revenue, tax revenue or revenue raised by levying taxes (both central and state) is an important source. Table 4 below presents a break-up of this figure. Table 4: Tax revenue (arranged in descending order; in Rs. Crore)
Budget Estimates (2011-12) Total Tax Collection Share in Central Taxes Corporation Tax Income Tax Customs duty Service Tax Union Excise Duties Other Taxes State Tax Revenue Sales Tax State Excise Stamps and Registration Tax on Vehicles Electricity Duty Other Taxes and Duties 36,793 15,444 6,240 3,069 2,615 1,515 1,994 12 21,349 13,490 2,623 1,900 1,650 847 840 Revised Estimates (2011-12) (A) 39,204 14,977 5,895 2,994 2,597 1,788 1,680 23 24,227 15,000 2,950 2,500 1,725 1,245 807 Budget Estimates (2012-13) (B) 44,539 17,707 6,470 3,500 3,220 2,290 2,205 23 26,832 16,550 3,250 2,800 1,900 1,505 827 % Change over last year (B-A)/(A) 14% 18% 10% 17% 24% 28% 31% 2% 11% 10% 10% 12% 10% 21% 2%

Observations: - Tax revenue is estimated to equal Rs. 44,539 crore in 2012-13, an increase of 14% over last year. - Of the state taxes, sales tax is estimated to contribute Rs. 16,550 crore, followed by state excise at Rs. 3,250 crore.

Budget Analysis: Rajasthan 2012-13

PRS Legislative Research

Expenditure analysis
One of the largest line items in most budgets is the expenditure on general services. General services include items such as administrative expenses, pensions and interest payments. In 2012-13, the revenue expenditure on general services is estimated to be Rs. 20,492 crore (or 33% of the total revenue expenditure of the government). Of this, Rs. 6,839 crore will be spent on pensions and retirement benefits, and Rs. 8,315 crore on interest payments. The above observations highlight some important expenditure items in the budget. A more comprehensive sectoral analysis can help understand state priorities. Tables 5 presents the budgeted expenditure on different areas: Table 5: Budgeted expenditure (arranged in descending order; in Rs. Crore)
Budget Estimates (2011-12) General Services Social Services Education, Sports, Arts & Culture Water, Sanitation, Housing, Urban Development Medical,Health & Family Welfare Social Welfare & Nutrition Welfare of SC/ ST & Backward Labour Welfare Others Economic Services Irrigation, Flood control & Energy Rural Development Agriculture & Allied Services Transport General Economic Services Industries &Minerals Science, Technology & Environment 19,324 23,842 11,512 5,696 3,158 2,557 502 110 307 17,319 6,966 4,109 2,522 1,937 1,538 210 37 Revised Estimates (2011-12) (A) 19,662 25,870 12,349 5,489 3,660 NA NA NA 405 18,414 7,753 4,163 3,058 2,411 709 280 41 Budget Estimates (2012-13) (B) 20,872 28,858 14,148 6,196 3,869 NA NA NA 493 22,178 9,667 4,897 3,416 2,866 1,006 274 53 22% 20% 25% 18% 12% 19% 42% -2% 28% % Change over last year (B-A)/(A) 6% 12% 15% 13% 6%

Observations: - The government is estimated to spend Rs. 22,178 crore on Economic Services in 2012-13, which includes Rs. 9,667 crore on Irrigation and Rs. 4,897 crore on Rural Development. - In 2012-13, Social Services is estimated to receive an allocation of Rs. 28,858 crore. This includes an allocation of Rs. 14,148 crore to Education, Sports, Arts and Culture. - Among the larger sectors, the highest increase in allocation is seen in General Economic Services, Irrigation, Transport and Rural Development.
DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research (PRS). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit group. This document has been prepared without regard to the objectives or opinions of those who may receive it.