SINKING BENGAL ECONOMY,EARLY ALARM BELL– soumya Aich Ray

sinking_economy__shams_biswasThis is to bring to your attention that keeping in mind the present condition of West Bengal regarding its unstable financial condition; we want to raise the following issues before the 15th Finance Commission. Along with the various problems, we have also mentioned certain ameliorative measures that, we believe, can be implemented for procuring all round development of west Bengal in this grave situation. We now present to you an analysis of the problems, and the respective corrective measures that must be put to effect immediately.

The total debt will balloon to Rs 3.66 lakh crore in 2017-18. A quick scan of the figures reveals quite a fiscal horror story. Next year, the state has to keep aside Rs 45,339 crore for debt repayment – a steep 30% more than Rs 36,869 crore, what it is supposed to spend this year. The reason for the jump is the 10-year loans maturing in 2017-18.

It appears worse from another perspective – the debt repayment amount will consume 81% of the state’s tax revenues next year.

In 2016-17, the total burden for principal repayment and interest would be around Rs 40,000 crores. In 2017-18 this would increase to more than Rs 47,000 crore. The situation is laced with irony as both the Chief Minister and Finance Minister constantly rails against the death trap.

The debt of the government rose throughout the past few years – Rs 2.75 lakh crore in 2014-15, Rs 2.99 lakh crore in 2015-16, Rs 3.33 lakh crore in 2016-17 and Rs 3.66 lakh crore in 2017-18.

The amount the government will spend in the next year under four heads such as loan repayment, salaries, pension and subsidies amount to a staggering Rs 1.06 lakh crore which is almost double of its tax revenue Rs 55,786 crore. The implications are simple – every rupee that she spends on development work and populist measures.

For 2016-17 the state faced a staggering total debt of Rs 3.34 lakh crore. The projected expenditure under the four heads loan repayment, salaries, pension and subsidies stood at Rs 94,256 crore. The tax revenue was at Rs 50,773 crore.

Immediately restore the social schemes done by UPA I &II with the same contributory percentage now. We oppose current central finance commission for the recent practice of percentage sharing.

Consider the central tax part for immediate restoration of financial crisis.

When the Left Front government was out of power in 2011, they left a total debt of Rs 1.93 lakh crore behind. When the present Finance Minister presented the budget this year, it was quite clear that the Trinamool Congress government will double that figure by the end of 2019 – a mere eight years after taking charge.

The government is required to give immediate attention to the following matters:

West Bengal should capitalise on its core competency of cognitive capacity in order to achieve fast economic growth.

An environment should be created in the state that helps bring back non-resident Bengalis working as scientists, professors etc. in reputed institutions in the west.

The government should create a financial hub since banking and finance use a lot of cognitive capability, which could significantly add to job creation.

Research should focus on improving rural productivity, capturing Indian as well as global consumer demand, tourism and so on.

Efforts should be made to attract multi-national research houses, undertake contract research for them in the state, and to encourage research that is locally useful.

Creation of an intellectual property rights strategy is a pre-requisite for a research-based development.

It is important to ensure rule of law and sanctity of contracts to attract both knowledge and dollar investors.

Direct efforts towards regaining West Bengal’s position as the education centre of the country.

The government can work to maintain traditional industries as well as simultaneously find new avenues in sunrise industries (petrochemicals, biotechnology, IT and IT-enabled).

The government should regulate land acquisition transactions between private parties in the interests of both growth and social justice.

In the long run, the government can invest in infrastructure to boost the attractiveness of non-fertile land in underdeveloped regions to disincentives acquisition of fertile, agricultural land.

Why Infrastructure development is of utmost importance:

West Bengal ranks below the national average on measures of infrastructure such as pucca road connectivity, electricity connections, phone connections and bank branch access. The distribution of infrastructure development is varied across the state, with the most backward districts lying below 60 per cent of the national average on the aforementioned measures. This situation has been largely unchanged over the last decade.

Infrastructure development must be viewed as a direct poverty alleviation strategy, not just a strategy for industrial development and economic growth.

Infrastructure investment choices by the state can be used to incentivise industrial location in less developed areas with barren or waste land.

Energy poverty cannot be explained by income poverty. Lack of access to electricity and clean fuel occur due to supply side bottlenecks which need to be removed immediately. This can be done through investments in gas and electricity generation and distribution technology, and upgrading the efficiency of existing technologies.

It can also be done by further incentivising medium sized enterprises to increase innovation and cost effectiveness of solar lighting technology, something already underway in West Bengal.

Delay in submission utilization certificates, non submission/delay in submission/ULBS/PRIS, delay in submission of accounts by autonomous bodies leads to delay of improvement work. The Commission needs to frame mechanism and monitoring for the same

How Public finance can be effectively improved:

Tax revenue can be increased by making the tax administration more efficient and lowering corruption.

New sources of generating non-tax revenue must be explored, such as the use of municipal bonds for infrastructure investment.

Joint public-private financing can be used to increase investment in new sectors.

Political discipline must be increased to prevent misuse and diversion of productive capital.

Cognitive capacity and research can emerge as two key factors that could enable West Bengal to achieve an economic growth rate that is a 3-5 per cent increment over India’s baseline growth. Collaboration among the industrial, educational, industrial and policy elite is required in the state.

Research needs to be developed as a key tool for economic growth in West Bengal. When research takes place, manufacturing follows automatically.

The public finance situation in West Bengal needs immediate attention. The government needs to lower its fiscal deficit and increase revenue generation in order to finance the capital formation needed to support long run development.

Soumyo Aich Ray

Soumyo Aich Ray

Leave a Reply

Your email address will not be published. Required fields are marked *