HPAS/Allied Mains 2022 Answer Writing Challenge Day 29: Model Answer

Question: Discuss briefly about the fiscal space for capital outlay in the context of Himachal Pradesh?  (8 marks, 120 words)

Answer: 

INTRO

• The Gross State Domestic Product (GSDP) of the state for 2022-23 (at current prices) is projected to be Rs 1,92,690 crore.
• This is a growth of 10% over the revised estimate of GSDP for 2021-22 (Rs 1,75,173 crore).
• In 2021-22, GSDP is estimated to grow at 12% over the previous year (at current prices).
• Fiscal deficit for 2022-23 is targeted at Rs 9,602 crore (4.98% of GSDP). In 2021-22, as per the revised estimates, fiscal deficit is expected to be 4.05% of GSDP, lower than the budget estimate of 4.52% of GSDP

BODY

• The Economic Survey of Himachal Pradesh (2021-22) observed that the state’s tax to GSDP ratio is low.
• The government faces the challenge of providing sufficient funds for investment and infrastructure expansion while maintaining fiscal discipline.
• For financial year 2022-23, the fiscal deficit is estimated to be 4.98% of GSDP.

o It is over the limit of 4% of GSDP permitted by the central government in 2022-23 as per the Union Budget.

• The Survey noted that the state spends substantial amount of its expenditure on revenue expenditure.

• In 2022-23, revenue expenditure is estimated to be 88% of the total expenditure (excluding debt repayment).
• The Survey observed an increase in spending on committed expenditure (salaries, pension, and interest).
• In the last five years, the share of committed expenditure has been between 65% and 70% of revenue receipts.
• Further, this share is expected to increase to 87% in 2025-26.