UP to bring ordinance to raise borrowing limit to 5% of state GDP

The state gets additional elbow of Rs 35,000 crore amid lockdown

Amid Covid-19 lockdown straining both the tax and non-tax revenues, the Uttar Pradesh government will bring an ordinance to raise the borrowing limit from 3 per cent to 5 per cent marked to the Gross State Domestic Product (GSDP) during the current financial year.

The proposed UP Fiscal Responsibility and Budget Management (FRBM) Act (2nd Amendment) Ordinance 2020 will provide an additional elbow of about Rs 35,000 crore to the Yogi Adityanath government in 2020-21 to deal with the slowdown of the economic activities following lockdown.

Last month, union finance minister Nirmala Sitharaman had allowed the states to raise the net borrowing limit from 3 per cent of the GSDP to 5 per cent, thus providing an additional finances window of Rs 4.28 trillion to all the states combined. However, the Centre had mandated the respective state governments to make necessary amendments in their FRBM Acts for the purpose.

Taking the cue, the Adityanath cabinet had recently approved the Ordinance format to amend the UP FRBM Act 2004, thus paving the way for the proposed Ordinance in the state.

According to UP cabinet minister Sidharth Nath Singh, the state had estimated the fiscal deficit at 2.97 per cent or the GSDP in the current financial year. The proposed Ordinance will increase the ceiling of the fiscal deficit to 5 per cent, he added.

“When the Yogi government had come to power, the fiscal deficit in UP was about 4.5 per cent, which was effectively brought down to 2.97 per cent in 2020-21 financial year,” he said.

The UP Annual Budget 2020-21 had pegged the GSDP at more than Rs 17.91 trillion, while the estimated fiscal deficit stood at Rs 53,195 crore or 2.97 per cent. The public debt was also projected at a manageable level of about Rs 5.16 trillion or 28.8 per cent of the GSDP.

The size of UP Annual Budget 2020-21, tabled in the state legislature on February 18, 2020 by state finance minister Suresh Khanna, totalled Rs 5.12 trillion, which was 7 per cent higher than UP Annual Budget 2019-20 of Rs 4.79 trillion.

UP Annual Budget 2020-21 had estimated nearly Rs 3.95 trillion and Rs 1.18 trillion under the revenue and capital expenditure heads respectively.

Besides, the Adityanath government had projected net state goods and services tax (SGST) and value added tax (VAT) kitty of Rs 91,568 crore, apart from Rs 37,500 crore in excise revenue.

However, following the slowdown linked to Covid-19, there could be drastic shortfall in these revenue projections, which are likely to be adjusted in the forthcoming supplementary budgetary proposals during the course of the current fiscal year.

Last month, the state government had hiked the tax on both liquor and petroleum products (petrol and diesel) to partly shore up its exchequer.