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Bengal's market borrowing rises manifold to meet non-plan expenditure
Kolkata, Jan 20 - A quantum leap in the market borrowing by the West Bengal government in the current financial year gives a strong impression that the state government is currently trying to meet the additional expenses needed for social schemes like Swastha Sathi or Lakshmir Bhandar announced by Chief Minister Mamata Banerjee before the election.
Simple arithmetic will make this easier. In the period between April 2020 to December 2020 when the state revenue plummeted to all time low because of the lockdown the state raised around Rs 35,000 crore from the market but interestingly enough during the current financial year between April 2021 to December 2021 the state went for a market borrowing of Rs 52,500 crore. During the same period in 2019 the state borrowed Rs 28,000 cr via State Development Loan.
However, a little deeper analysis will make things more clear. According to a notification issued by the Reserve Bank of India (RBI), a total of 12 Indian states have gone for a total market borrowing of Rs 20,659 crore on January 18, 2022. West Bengal's borrowing in that tranche will be Rs 1,000 crore.
However, the silver lining is that unlike the earlier three tranches, West Bengal is not the highest borrowing state, but it is the Uttar Pradesh with the borrowing figure of Rs 3,000 crore is the highest.
This is the second tranche of market borrowing by the West Bengal government during the current month of January 2022. Earlier on January 6, 2022, the West Bengal government borrowed Rs 2,500 crore being the highest borrowing state in that tranche. On that date nine Indian states borrowed a total of Rs 19,340 crore from the open market.
In the last month of December 2021 too, West Bengal borrowed twice from the open market. On December 14, 2021 seven Indian states borrowed a total of Rs 7,053 crore. The state borrowed Rs 2,500 crore - the highest among the borrowing states in that tranche.
Again, on December 24, 2021, 16 Indian states borrowed a total Rs 22,984 crore, with the borrowing figure for West Bengal standing at Rs 4,000 crore. West Bengal was the highest borrowing state in that tranche as well. This means that within a span of just 35 days from December 14, 2021 to January 18, 2022 West Bengal borrowed Rs 10,000 crore from the open market.
According to experts, with the decline of the revenue generation, multiple market borrowings have now become the essential compulsion of the West Bengal government to meet its recurring expenses. The experts are of the opinion that the state is struggling with the non-plan expenditure mostly to meet the promises made by chief minister Mamata Banerjee during her election campaign.
After coming to power for the third time, Banerjee announced two major schemes - 'Lakshmir Bhandar' and 'Swastha Sathi' for all - the schemes that demand a huge financial involvement. 'Lakhmir Bhandar is a project where the state is supposed to give Rs 1,000 to women belonging to SC/ST/OBC and Rs 500 to women belonging to the General caste. The government has allocated a budget of approximately Rs 12,900 crore for around 1.8 crore women who have so far registered themselves for the scheme.
Initially the government had an estimate that nearly 2 crore beneficiaries will register for 'Lakshmir Bhandar' but so far, the government has received an application of 1.63 crore of which 1.52 crore has been approved. Nearly 7 lakh applications have been cancelled. The government has spent more than Rs 800 crore on the project and going by the figure the finance department estimates that the state government will have to cough up another Rs 5,600 crore which might in turn lead to a staggering figure in a full financial year.
Countering the centre's Ayushman Bharat, the state launched its own scheme - 'Sasthya Sathi Prokolpo' where some citizens of the state were given an annual health coverage of five lakh rupees. After coming to power in 2021, the chief minister opened 'Swastha Sathi' for all the citizens of the state leading to a quantum leap in the expenditure. Even a year back when the estimated budget for this project was around Rs 925 crore, this year the allocation touched an astronomical figure of Rs 2,000 crore annually.
As a result, the state has to go to the open market to meet the additional financial requirement. According to economists, the state's overdependence on market borrowing is an alarming trend and if not regulated properly it might lead to the collapse of the economy.
The first is that during the last ten 10 years the non-plan expenditure of the state has inflated at such an alarming level, the government has become compelled to go for market borrowing to meet those expenses. Secondly, since the state government does not have a steady and alternative source of revenue generation, it has to depend on market borrowing.
Finally, economists apprehend that the state government is on the verge of falling into the debt trap, where it has resorted to fresh borrowings to service the earlier debts. Economists also feel that currently the debt to gross state domestic product (GSDP) ratio in West Bengal has reached 30 per cent and things will go out of control if it reaches 50 per cent.
Economic and financial experts also feel that this trend of borrowing makes two things clear. According to them, in absence of a suitable revenue generation model where state excise is not the only source, there will be no other option for the state government but to go for regular market borrowings. The second factor is that following the skyrocketing non-plan expenditure during the last years, there has been an increased requirement for aggravated market borrowing to meet those expenses.
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