Orissa Finances and Fiscal Impact of PSUs

Abstract

This article has examined the fiscal indicators of Orissa, and the findings suggest a persistent deterioration in fiscal balances. The states' own revenue collection falls far short of expenditure on salaries/pension and the interest payments. The revenue deficit is now the major component of fiscal deficit which has resulted in crowding out of capital outlay in physical and social infrastructure. With overwhelming borrowings, the state has also entered into a debt trap, and nothing less than a comprehensive package for fiscal reforms can pull it out. The article has also analyzed the fiscal impact of providing continuous budgetary support to the inefficient and loss making PSUs. It is estimated that the state government has so far committed resources, including hidden subsidies and guarantees, to the tune of half a billion rupees or I million US dollar per day, which have gone mainly to meet the losses of the PS Us. The state's borrowings on this account is responsible for nearly a 1 per cent point of fiscal deficit, measured as a percentage of nominal GSDP. In the final section, some concluding remarks are offered.