Fiscal Scenario of the State of Uttar Pradesh

Abstract

Uttar Pradesh most populous State experienced almost the same pattern of fiscal deterioration as did the other States. In the beginning of the nineties all the fiscal parameters were showing the deficit of significant magnitude. As there was no effort on the part of the State such imbalances were enlarged further and reached the peak by 1998-99. Around this time fiscal discipline began to be focused resulting in the marked improvement in all the fiscal parameters. The improvement in fiscal situation realized in the new century may turn out to be instable. The area of concern could be the injudicious capital expenditure reflected in the abysmally low interest receipts which as per-cent of loans and advances, for most part since early nineties, has been less than one per-cent. Dividend on equity too was low till 1997-98 but thereafter it increased significantly. Of late State has succeeded in bringing about fiscal correction. Twelfth Finance Commission’s debt relief package played a key role in such corrections. Besides consolidating all its outstanding loans, contracted at higher interest rates, and swapping them with the low interest one Commission offered a debt write-off as well. Of these the former was subject to State enacting a Fiscal Responsibility Act which makes the State committed to achieving certain targets by the year 2008-09. However the latter was conditional upon State’s fiscal correction actually achieved every year. So the present comfortable fiscal situation of the State has been obtained through debt relief measures and the greater financial devolution. States own revenue structure no fundamental change could be observed. This generates apprehensions that present fiscal discipline can be short lived or alternatively it can continue at the cost of depriving the population the necessary social and economic services.