Shimla: Failing o create adequate sources of the revenue, Himachal Pradesh government is slipping into the vicious circle of debt trap. The comptroller and auditor general (CAG) of India, in its latest report, has pointed out that state lacking focus on the capital expenditure and social sector spending.

The CAG report revealed the state not using borrowing wisely and repaying the earlier debt from it. CAG observed “During 2010-15, 36% to 76% of borrowings were used for repayment of earlier debts, which means fresh borrowings are being used to finance the earlier borrowings and meet the increasing revenue expenditure,”

State’s fiscal liabilities were at Rs. 38,192 crore as of March 31, 2015, which were 40 % of GSDP and 214 % of the revenue receipts. The fact that worries the government auditor was the share of closing balance of market loans in the total public debt that increased from 49.45 % in 2010-11 to 59.06 % in 2014-15.

The CAG observed the state borrowings have reached the limits set in Fiscal Responsibility Budget Management (FRBM) Act, and any fresh borrowings may only have an adverse effect on the fiscal position of the state government.

The CAG advised the Himachal Pradesh government to consider need-based borrowings and utilise the borrowings for capital expenditure and not to finance the burgeoning revenue expenditure.

The expenditure on salaries, interest payments, pensions and subsidies has shown consistent increase over the period from Rs. 10,445 crore in 2010-11 to Rs. 14,982 crore in 2014-15.

Salaries, interest payments and pensions share major chunk of the non-plan revenue expenditure. The CAG has commented “the state government may explore suitable measures for containing the other components of non-planned revenue expenditure so that revenue deficit could be eliminated for allowing scope for assets creation and sustainable development of the state.”

Further, the CAG also observed that the state has not given priority to the capital expenditure, as the percentage ratio to revenue receipts has gone down to 10.88% in 2014-15 from 11.17 in 2011-12. “Net capital expenditure as percent of GSDP declined from 2.72 in 2011-12 to 1.91% in the current year, which shows that the borrowed money was used to meet the revenue expenditure instead of using it for creation of assets,” the CAG report said.

The capital expenditure in Himachal is far low than that of average ratio of Special Category States (SCS) 14.02 in 2011-12 and 14.22 in 2014-15.

The social sector expenditure as a proportion of aggregate expenditure in the state was lower than that of SCS by 2.92 and 3.06 % in 2011-12 and 2014-15, respectively. “The state government should take steps to enhance its social sector spending and simultaneously accord priority to capital expenditure,” the report read.

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Rahul Bhandari is Editor of TheNewsHimachal and has been part of the digital world for last 15 years.