There could be slippages from West Bengal's budget targets as the state is depending on grants for fiscal consolidation, a report by rating agency Fitch said on Thursday.
The state expects the current revenue to increase 30.10 per cent, year-on-year, and own tax revenue by 26.02 per cent in the financial year 2012-13.
This will be the highest growth in own tax revenue since financial year 2000-02, up one percentage point from FY11.
However, as the FY13 budget has proposed increasing taxes on luxury items, it will be a tough task for state tax administration to attain the projected own tax revenue growth next fiscal, according to the Fitch report.
“Despite the slow pace of fiscal consolidation, higher nominal growth of the state economy in relation to interest rate on debt and a reduction in primary deficit provide some cushion to the fragile debt position of West Bengal,” said Devendra Kumar Pant, director, Fitch's International Public Finance team.
The central government's grants and assistance for the state plan are likely to increase by 59.08 per cent, year-on-year and 96.46 per cent year on year, respectively, in FY13.
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This grant and assistance would help West Bengal to build economic and social infrastructure, said Fitch. The budget has pegged expenditure growth at 9.66 per cent for FY13, lowest since FY06. High allocations for capital expenditure (FY13: 104.45% year-on-year) along with central assistance augurs well for medium- to long-term growth prospects, the report said.
"Attaining high own tax revenue growth in a difficult economic scenario and limiting current expenditure growth to the proposed 9.66 per cent could be an uphill task for the state to achieve,” said Siva Subramanian, analyst, Fitch's International Public Finance team.
The state economic growth in the financial year 2012 was likely to remain at 7.06 per cent, same as the financial year 2010-11, down from 9.84 per cent in financial year 2009-10.
This will result in eleventh five-year plan period average real gross state domestic product (GSDP) growth of 7.32 per cent, much below the targeted 9.1 per cent.
This forms a slippage of 1.78 percentage points and is the fourth-largest slippage among major states.
However, it is higher than average growth of 6.33 per cent achieved in the tenth five-year plan period, said the report.