Prepared by Patricia Reynolds and Poonam Gupta.
The consolidated public sector comprises the central government, state governments and union territories, central public enterprises (also known as public sector undertakings or PSUs), and the accounts of the Oil Coordination Committee (OCC). Fiscal sustainability risks are discussed in greater detail in Chapter 5 of India at the Crossroads, T. Callen, P. Reynolds, and C. Towe eds., (Washington DC: IMF), 2001; and also in the Annual Report 1997/98 of the Reserve Bank of India.
Pay scales for central government civil servants are determined on the basis of recommendations of the Pay Commission, a constitutionally-mandated body that is established about every ten years. Recommendations of the Fifth Pay Commission, which submitted its report in January 1997, included a three-fold increase in basic pay scales, downsizing of 30 percent in each government department and agency over a 10-year period, and an overhaul of the organizational structure of the central government. Although the wage awards were incorporated beginning with the 1997/98 budget—resulting in a permanent increase in central government wages and salaries of roughly 0.5 percent of GDP—the recommended reorganization and staffing cuts were not implemented. While state governments are not obligated to adopt the Pay Commission recommendations, in practice they have tended to follow central government pay revisions with a lag of about a year.
The staff’s definition of the deficit treats divestment proceeds as below-the-line financing, while the authorities’ definition includes divestment proceeds in revenues. Under the authorities’ definition of the deficit, the overall deficit was targeted at 5.1 percent of GDP, compared with 5.4 percent of GDP in 1999/2000.
Ratios for 2000/01 employ the staff’s estimate of nominal GDP. Under the authorities’ definition of the deficit (see footnote 4, above), and using the official nominal GDP estimate for 2000/01, the overall deficit is estimated to have exactly met the 5.1 percent of GDP budget target.
Revised estimates for 2000/01 were released at the time of the 2001/02 budget, at end-February 2001. Unaudited actuals for 2000/01 were released by the Controller General of Accounts on May 31, 2001, although these figures contain insufficient detail to permit reconciliation with either the budget or revised estimate figures (e.g., breakdowns of tax revenues by type of tax or of expenditures beyond categorization into current and capital items are not provided). Actual and comprehensive figures for 2000/01 will be released at the time of the 2002/03 budget.
As part of its strategy to ensure food security, the government targets a foodgrain buffer stock of 15 million tons. By the end of 2000/01, the actual stock had reached about 42 million tons, owing to the high procurement prices offered to farmers.
Plan expenditures are jointly determined by the Planning Commission, Ministry of Finance, central government spending ministries, and—where relevant—state governments. These consist mainly of outlays for development projects, and have both capital and current expenditure components.
Special deposit schemes include special deposits with the government by nongovernment provident funds, superannuation and gratuity funds, and surplus funds of the Life Insurance Corporation and the Employees’ State Insurance Corporation.
Specifically, Rs 120 billion in divestment receipts were targeted for 2001/02. The first Rs 70 billion earned was earmarked for restructuring assistance to PSUs, worker safety nets, and debt reduction. The next Rs 50 billion—if realized—would be used for additional budgetary support for plan expenditures. If all or part of this Rs 50 billion is not earned, the associated sending would not go forward.
External assistance was also anticipated, in particular from the World Bank and Asian Development Bank, although this was not incorporated into the center’s budget figures.
Includes 25 states and the National Capital Territory of Delhi that existed until October 2000; in November 2000, three new states—Chattisgarh, Jharkhand, and Uttaranchal—were created by bifurcating the states of Madhya Pradesh, Bihar, and Uttar Pradesh, respectively.
During the early months of 1999/2000, the central government accelerated transfer of budgeted central tax and plan grants. Then, in December 1999, Rs 25.7 billion in transfers to thirteen states were converted to three-year loans under a newly-created Extended Ways and Means Advances Facility. In addition, seven of these states were allowed to borrow Rs 19.2 billion in excess of borrowing limits set by the central government at the beginning of 1999/2000. The thirteen states were Andhra Pradesh, Assam, Himachal Pradesh, Jammu % Kashmir, Madhya Pradesh, Manipur, Mizoram, Nagaland, Orissa, Punjab, Rajasthan, Sikkim, and Uttar Pradesh.
Reserve Bank of India, Department of Economic Analysis and Policy, “Report of the Core Group on Voluntary Disclosure Norms for State Governments,” January 12, 2001.
There were 240 PSUs as of end-March 1999, according to the most recent Public Enterprises Survey published by the Department of Public Enterprises. In contrast, the central government budget reports financial information for somewhat less than 200 PSUs. The difference in coverage results from the budgets’ inclusion of the Indian Railways (which is formally a commercial department) and some subsidiaries of PSUs that receive direct budgetary support, and its exclusion of PSUs not receiving budgetary support.