Reforms ushered in fiscal discipline

Q&A/AP FM Y Ramakrishnudu

What has been the impact of fiscal reforms initiated by you in the year 2000?

"We were very successful in implementing the reforms based on our medium-term fiscal policy that we planned for five years, besides enforcing a certain amount of discipline in the government spending .

Though not in absolute terms, as percentage of the gross state domestic product (GSDP), the revenue expenditure was brought down from 22 per cent to 9 per cent, while the capital expenditure increased by about 1.5 per cent in the last four years through the zero-based budgeting.

The state government's tax and non-tax revenues have grown at an average 13 per cent for the last four years. For the first time in the country, the state government issued draft budget for public debate before placing the final draft in the state assembly. We incorporated some important suggestions like re-allocations in agricultural sector.

How successful have you been in cash management?

The state finance department has improved cash management. Earlier, we used to clear bills and salaries throughout the month, which created a problem. Now, the department clears only salary bills and other emergency bills in the first-half of the month.

The payments for the works will commence after the 20th day in a month. That is how my department has achieved the balance in cash management. The government stopped harping on ways and means and over drafts completely.

Could you explain the flexibility effected in regard to procedures?

We also liberalised the procedures for budgetary sanctions to a great extent. Earlier, the practice was that every file pertaining to monetary sanction from each department used to come to finance department for clearance.

But last year, we issued business release orders (BRO) for a six-month period to all the government departments for automatically availing of the funds allocated in the budget without approaching the finance department.

This year the finance department issued BROs for the expenditure for the first three quarters at the beginning of the financial year. We also gave powers on re-appropriation of funds except those funds meant for salaries, O&M, plan to non-plan. This liberalisation of procedures has provided great relief in the day-to-day functioning of these departments.

What about issues of transparency in financial administration?

We also brought about transparency in internal audit systems. We have finished the audit of arrears by appointing private chartered accountants. The government is very much on the path of achieving zero revenue deficit by the year 2006.

Though fiscal deficit can not be brought down to zero level, the government is determined to bring it down to 2 per cent of the GSDP. Now the state's fiscal deficit is at 4 per cent in GSDP, whereas the Government of India's fiscal deficit is about 6 per cent of the GDP.