Enhance fiscal deficit target to at least 4 per cent: Telangana to Centre

Hyderabad: The Telangana government has appealed to the Centre to enhance the fiscal deficit target to at least 4 per cent of the Gross State Domestic Product (GSDP) from the ideal levels of around 3.5 per cent, in order to contribute to the “Viksit Bharat,” and sought the conversion of the 50-year interest-free loans extended to states into grants.

Addressing the “Pre-Budget Meeting” in Delhi on Saturday, January 10, Telangana Deputy Chief Minister Mallu Bhatti Vikramarka said to achieve USD 3 trillion economy by 2047, the state would require more resources to invest in public infrastructure and to increase our capital investment rate from the present 37 per cent to 50 per cent of GSDP.

“To sustain this and to transform the Indian economy into a USD 30 trillion by 2047 and enable the States to contribute to Viksit Bharat, it is necessary to enhance their fiscal deficit targets to at least 4 per cent of GSDP per annum. In addition, the 50-year interest-free loans given to states may be converted into grants and the amount of assistance may be doubled from the current levels,” he said.

According to Bhatti, the central government is currently spending over 20 per cent of its total expenditure on State and Concurrent subjects. A 25 per cent reduction in Centre’s expenditure will free up over Rs 2.21 lakh crore per annum and that amount can be transferred to States for sector and state-specific needs.

Telangana lost gains: Dy CM

In recent years, the share of cesses and surcharges in the gross tax revenue of the Centre reached 20 per cent. As a result, though the recommended share of tax devolution to states by the 15th Finance Commission is 41 per cent, the states are actually getting only 30 per cent of the gross tax revenue of the Centre as tax devolution.

He opined that the rate reduction under GST 2.0 may boost demand, but it is doubtful if this can be sustained year after year. “It is expected that states revenues under GST may decrease due to rate reduction, a suitable mechanism needs to be put in place to compensate the States for loss of revenue,” the Deputy CM said.

Noting that for the first time, the union government broke the tradition by not accepting the State Specific and sector Specific grants recommended by the 15th Finance Commission, he said as a result, Telangana lost Rs 2,362 crore in the form of State specific grants and Rs 3,024 crore in the form of sector specific grants.

He appealed to Union Finance Minister Nirmala Sitharaman to accept all the recommendations of the 16th Finance Commission relating to fiscal transfers to the State as such transfers come as a package.