Upswing in economic activity buoys state revenue growth

The state's revenues are growing in leaps and bounds despite the fact that no tax hikes were imposed in the last 10 years.

The trend has been more pronounced in the last three years with the proportion of the state's own revenues rising to 10 per cent in the Gross State Domestic Product(GSDP) since 2002-03.

The average annual growth in revenues during the three-year period stood at 10.3 per cent. The ever-expanding revenue base assumes even more significance as no indirect measures such as raising tariff of either public transport or electricity had been contemplated during the period.

While the state finance department attributes this healthy growth in revenues to the upswing in economy of the state, certain other factors are also deserved to be taken into due consideration, observers feel.

Phenomenal increase in sales tax receipts of the state was registered during the three-year period between 2002-03 and 2004-05 with the growth rate ranging from 18 to 20 per cent in that order.

The fact that over 40 per cent of the total sales tax receipts come from just petroleum products and liquor characterises the unique revenue picture of the state.

"Just go around the ports and you will find how all of them are bubbling with export, import activities like never before. The upswing in economic activity is the major reason for the revenue growth in the state," A Giridhar, secretary, state finance department, told Business Standard.

According to him, commercial taxes and motor vehicle taxes are among the biggest contributors to the revenue growth on account of economic buoyancy.

"Car sales in Andhra Pradesh have touched the one-lakh mark for the first time in 2003-04. And it will cross the one-lakh mark during the current year. This narrates the present scenario," he said.

In the given back drop of encouraging business atmosphere and also hoping a good kharif and rabi seasons, the state government has fixed a 15.7 per cent growth rate for the state's own revenues for the year 2005-06, in the annual Budget, which was presented to the state legislative Assembly a couple of days ago, as compared to the three-year average of 10.3 per cent.

Income to the state exchequer comprises five major sources of revenue -- commercial taxes, excise, transport, stamps & registration and mines & geology. Out of the total tax revenues(both state and central) of Rs 26,668 crore, the Budget estimate of the sales tax receipts for the year 2005-06 is almost 50 per cent at Rs13,156 crore out of the total tax revenues (both state and central) of Rs 26,668 crore.

Sales tax receipts during the current financial year stood at Rs 11,242 crore as compared to 9,186 crore during 2003-04 and Rs 8,337 crore during 2002-03.

Taxes on vehicles is expected to go up to Rs 1,612 crore as compared to Rs1395 crore and revenue from stamps and registration department is estimated at Rs1,511 crore as compared to 1,312 crore during the current year.

Finally, the excise revenue is also expected to go up to Rs 2,851 crore as compared to Rs 2,477 crore in the current fiscal. It may be noted that the excise revenue stands second in terms of volume after the sales tax receipts.

The liquor sales in Andhra Pradesh outperforms the total volumes of the other three Southern states of Karnataka, Kerala and Tamil Nadu, including the neighbouring Orissa.

In the central domain, the corporation tax is expected to register a major growth at Rs 1,744 crore (Rs1,584 crore) as compared to other taxes such as income tax and central excise which showed a marginal increase in the Budget estimates.

The state's share in central taxes is estimated to be Rs 6,988 as compared to Rs 6,560 crore in the current year. Total revenues estimated for the year 2005-06 stood at Rs 35,976 crore as compared to Rs31,993 crore in the current year.

But despite the growth in revenues, there is little respite from the growing fiscal deficit which is estimated to be Rs 8,379 crore for the year 2005-06 compared to Rs 6,706 crore in the current fiscal and subsequent dependence on borrowings on account of growing expenditure both on revenue and capital accounts, which amounts to Rs 55,331 crore.