Stating that Telangana chief minister K. Chandrashekhar Rao is not guided by a “pessimistic view" of “conventional economics", chairman of the 15th Finance Commission N.K. Singh on Tuesday said that the new state, however, has a fiscal deficit that “looks somewhat stressed".
Singh made the remarks, in which he also lauded the state for its growth trajectory and its major irrigation projects, after a tour across the state over the last three days during which he met various stakeholders.
“I can say that he acted with both audacity and panache. He (Rao) believes that economic growth and wealth maximization (through welfare schemes like Rythu Bandhu and other projects) will have multiple gains for the people of Telangana," Singh said while addressing a press conference after his three-day tour ended on Tuesday. The 15th Finance Commission chairman, however, hit the caution button over Telanngana’s “unsound development".
He pointed out that the four districts (Hyderabad, Ranga Reddy, Malkajgiri and Medchal) out of the 33 contribute 52% of the gross state domestic product, while some of the others are below the average. While stating that Telangana’s growth rate touched 20% (from April to December 2018) as against the neighbouring Andhra Pradesh’s 14%, Singh, however, said that a roadmap was also required to address the fiscal deficit, which rose sharply from 3.26% of GSDP in 2015-16 to 5.35% in 2016-17 (The fiscal deficit has, however, come down to 3.12% in 2017-18).
In his observations, Singh also noted that in 2016-17, Telangana had the highest own tax revenue (OTR) to GSDP of 7.34% amongst all 29 states as compared to average OTR of 6.27% of all states in India. “Except in the initial months, the state has not received any GST compensation," he added and also termed Rao’s flagship drinking water ‘Mission Bhagiratha’ scheme as a “great vision".
During the meeting with Rao and other officials, the state government also urged the commission to allow the continuation of the facility of additional borrowings over and above the 3% of GSDP limit, to compensate Telangana suitably for the implementation of GST- higher tax devolution and to significantly increase grants to rural and urban local bodies.
On his part, Rao also said that there is a need for separate institutional mechanisms to support the capital needs of backward states outside the Finance Commission. “We, therefore, strongly urge the Finance Commission to strike a balance between equity and efficiency in their dispensation so as to ensure that the performing states are not penalized," said a press release from his office.
Rao also stated that the profitability and productivity in agriculture is low and that there is a huge gap in the pricing between farmers and consumers. “Farmers do not get enough income to take care of their families. The Investment support (scheme) of ₹10,000 per acre (@ ₹5,000 per both Kharif and Rabi seasons) will be a step in the right direction to address the distress in the sector," he added.