Eastern Mirror Desk
Dimapur, March 24 (EMN): Nagaland’s gross state domestic product (GSDP) has steadily increased in the last five years from 19,524 crore in 2015-16 to 30,508 crore in 2019-20.
The state’s GSDP growth rate at 11.82% in 2019-20 was higher than the all India GDP growth rate, which was at 7. 21%, according to the state finances audit report of the Comptroller and Auditor General (CAG) of India.
The report stated that the tertiary sector was the major contributor of GSDP with 56% while primary sector was the second largest contributor with 30%; while secondary sector (12 %) and subsidies and taxes (2%) were third and fourth respectively.
Meanwhile, the state’s total expenditure for the year was INR 12,852.60 crore, which increased by 3% over the previous year. The state’s fiscal deficit further increased by 31.96%, as compared to the previous year.
The CAG, in its report, said that the government failed to meet the projections made under Nagaland Fiscal Responsibility and Budget Management (FRBM) Act during the year ‘as it could not achieve surplus on revenue account and the fiscal deficit-GSDP ratio and outstanding debt-GSDP ratio were above the ceilings prescribed under the Act’.
“Due to short contribution to the National Pension scheme (NPS) and misclassification of expenditure, the revenue deficit was understated by 33.8 crore and fiscal deficit by 30.51 crore,” it read.
The CAG recommended to keep up the trend of own tax revenue collection achieved during 2019-20 by focusing on other potential areas, apart from SGST to have a sustained increase in own tax revenues.
“The State Government needs to increase its capital expenditure and give more impetus to asset creation for sustained economic growth,” it said.
It added that the state needs to make efforts to achieve the projections on major fiscal parameters, made in the Nagaland FRBM Act through prudent financial management.
Expenditure on health, education lower than NE states
The state’s share of expenditure on health (5.38% and 5.20% during 2015-16 and 2019-20 respectively) was lower than the averages of Northeastern and Himalayan states (5.95% and 6.19% during 2015-16 and 2019-20 respectively).
Similarly, the state’s share of expenditure on education (14.79% and 12.92% during 2015-16 and 2019-20 respectively) as proportion of aggregate expenditure was less than that of the averages of Northeastern and Himalayan states (18.32% and 17.42% during 2015-16 and 2019-20 respectively).
During 2019-20, the state had a revenue deficit of INR 213.73 crore, fiscal deficit of INR 1,428.22 and primary deficit of INR 614.48 crore.
Grants-in-Aid from Government of India increased by INR 315.36 crore (4.82%), while the state’s share of Union Taxes and Duties decreased by INR 525.33 crore (13.85%) as compared to the previous year.
Committed expenditure like salary and wages, pension, interest payments steadily increased during the last five-year period.
Under the National Pension System (NPS), the state government ‘short contributed’ INR 30. 51 crore resulting in understatement of revenue and fiscal deficit.
Further as on March 31, 2020, INR 170.35 crore was outstanding under NPS with the state government and had not been transferred to National Securities Depository Limited (NSDL), ‘creating avoidable outstanding financial liabilities under the scheme’.
The CAG stated that the state government would do well by increasing its expenditure on health and education to compare favourably with NE states.
It also suggested the state government to fulfill its obligation by releasing arrears of its contributions and transferring the outstanding funds already accumulated to NSDL for management of the NPS, to avoid possible future liabilities under NPS.
Departments incurring excess expenditure
During 2019-20, against the total budget approved by the State Legislature of INR 22,496.42 crore (Original: INR 18,026.11 crore plus supplementary INR 4,470.31 crore), departments incurred an expenditure of INR 19,733.64 crore, leaving savings of INR 2,762.78 crore (12.28% of the total budget).
It said that the Planning and Machinery department (Grant No. 27) was ‘not cautioned against persistent savings; nor were their budgets varied in accordance with their ability to absorb the allocations’.
At the beginning of the year 2019-20, there was an outstanding excess expenditure of INR 723.70 crore under five grants (pertaining to the year 2014-15 to 2018-19) which required regularisation as per Article 205 of the Constitution of India.
“Supplementary grants/ appropriations were obtained without adequate justification, and funds were expended without budgetary provision. Despite flagging this issue every year over the last several years, the State Government had failed to take corrective measures in this regard,” it said.
It said that the Finance department should provide supplementary grants only after proper scrutiny and realistic assessment of requirements of the concerned departments, to avoid under or overspending by them.
Review of investment in six SPSE necessary
Nagaland had a total of six State Public Sector Enterprises (SPSE) (all Government companies), which included one non-working SPSE, as on March 31, 2020.
The investment of the state government (capital and long-term loans) in SPSEs as per the State Finance Accounts 2019-20 was INR 110.23 crore as against the investment of INR 35.15 crore as per the records of SPSEs.
It said that the state government had provided budgetary support to Nagaland Handloom and Handicrafts Development Corporation Limited (Grant: INR 9.74 crore), Nagaland State Mineral Development Corporation Limited (Grant: INR 9.29 crore) and Nagaland Industrial Development Corporation Limited (Loan: INR 3.41 crore and Grant: INR 0.80 crore).
As on September 30, 2020, the five working SPSEs had an arrear of 21 accounts ranging from two to 10 years. The highest pendency of accounts pertained to Nagaland Handloom and Handicrafts Development Corporation Limited (10 accounts).
The CAG recommended the state government and the SPSEs to take concrete steps to reconcile the differences in the investment figures as per State Finance Accounts in a time-bound manner.
“Accumulation of huge losses by four out of five working SPSE had eroded public wealth, which is a cause of concern and the State Government may review the working of these SPSE to either improve their profitability or close their operations,” it added.
