Assam: Study of State Finances
Publication dateJan, 2001
DetailsReport submitted to the Government of Assam.
AuthorsD. K. Srivastava, Saumen Chattopadhyay and T. S. Rangamannar
The development of Assam is critical for the development of India's northeast. Assam alongwith other north-eastern states shares the problems of remoteness, and hilly terrain with associated high transportation costs. Assam's finances are vulnerable to the interplay between inherent weaknesses in the economy and critical exogenously driven fiscal shocks. Assam has already experimented certain fiscal reforms which had partially succeeded upto 1998-99. Subsequently, with growing expenditures, the state has landed in an unprecedented fiscal crisis. Fiscal deficit as a proportion to GSDP was as large as 7.25 percent of fiscal deficit for current expenditures. This study provides two sets of projections. The first set indicates the implication of continuation of the existing trends. Without reforms, the debt to GSDP ratio rises to about 52 percent and fiscal deficit becomes as large as 8.5 percent, highlighting the need for urgent reforms. In the second set, the study suggests an eleven fold reform package covering areas ranging from taxation, improving recoveries in non-tax revenue, salary and pension reform, reforms in subsidy with better targeting, reforming planning strategy, debt management and control, augmentation of capital expenditure relative to GSDP, restructuring public enterprises, target based control of revenue and fiscal deficits, besides budgeting reforms. The reform scenario shows that the debt to GSDP ratio could be contained to a level of 30 percent by 2006-07. Revenue deficit can be eliminated by 2005-06, and gradually the structure of expenditure can be made to move away from interest payments and pensions, creating space for more attention to important social services like health and education.