Expert Talk on Budget at AUJ
An Expert Talk on ‘An Insight into The State Finance: A Study of Budget’ was organized by Amity School of Economics, Amity University, Jharkhand on Tuesday wherein Dr. Somnath Sharma, Assistant Advisor, Reserve Bank of India (RBI), Mumbai was the speaker.
Interestingly, he hails from Ranchi and has pursued higher education from Tokyo. According to him, RBI is the banker of the government. If the centre or state government wants to borrow money, it is RBI which arranges the amount.
Addressing the participants, he first outlined the analysis of state finances in 2020-21 including key fiscal indicators of states in 2020-21 and 2021-22, outstanding debt of the state governments, debt decomposition.
Secondly, he emphasized on coping with the pandemic- a third tier dimension including primary survey of the municipal corporations.
Speaking about some basics of fiscal policy, he described the fiscal policy as the use of government spending and taxation to influence the economy. Governments typically use fiscal policy to promote strong and sustainable growth and reduce poverty.
There are three tiers of governments in India consisting Central Government, State Governments and Local Governments (municipal corporations and other Panchayati Raj Institutions).
Referring the key fiscal indicators, he indicated Gross Fiscal Deficit (GFD), Revenue Deficit (RD) and Primary Deficit (PD) which deteriorated in 2020-21 and are budgeted to decline in 2021-22.
States also have a marginal increase in the administrative expenditure. “The states publish their monthly data and give to Comptroller of Auditor General (CAG),” he said.
He also explained outstanding debt, contingent liabilities, and debt composition.
Highlighting, the second part of his speech, he presented the stylish facts of first and second waves, functions in response to pandemic, financial challenges faced by municipal corporations in 2020-21 and 2021-22.
Concluding the presentation, he mentioned that the pandemic has deteriorated fiscal position of states where debt reached to more than 32 percent. There is a need for calibrated approach toward reduction of GFD and debt, keeping in view growth recovery. Impact of the pandemic has been heterogenous across time and space, warranting the adoption of localized approaches.
Involvement of third tier in the COVID-19 response became the catalyst for forging vistas of cooperation with civil society, NGOs, and the private sector in mitigating the pandemic’s impact.
COVID-19 amplified the structural constraints on local government finances and brought to the fore new financial challenges. Municipal Corporations budgets came under severe strain during the COVID-19 pandemic, forcing them to cut down discretionary spending, use reserves and other contingency funds, including resources from funds linked to the infrastructure sector.
Prof. (Dr.) Raman Kumar Jha, Vice Chancellor, Amity University Jharkhand mentioned the term financial management. He said, “It is necessary to see how much funds from centre are used by the state. State budget is much more than union budget. The sad thing is that the deficit the state faces does not get that attention that it must get.”
“The attention to the state finances is a must as they are the functioning units. It has wider implications. Who is responsible becomes an important point,” he stated.
Prof. (Dr.) Ajit Kumar Pandey, Director, Amity University Jharkhand, and Mr. Prabhakar Tripathi, Registrar, Amity University Jharkhand conveyed their blessings on this occasion.
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