HIMACHAL PRADESH ECONOMY AND FINANCIAL PROFILE: REVENUE MANAGEMENT AND FRBM COMPLIANCE AKSHAY SOOD SPECIAL SECY (FIN) & ADVISER (PLANNING)

State Demographic Profile Particulars HP All India Population (Crore) (Census 2011) 0.69 121.05 Decennial Growth Rate(%) 12.95 17.68 Population Density per sq. km. 123(2D) 79(3D) 382 Sex Ratio (Females per 1000 males) 972 943 % of Rural Population 90.00 68.84 Literacy Rate 82.80 73.0 Life Expectancy (2006-10) 70.0 66.1 Male 67.7 64.6 Female 72.4 Source: Census 2011 & SRS Bulletin

STATE FINANCIAL PROFILE CAGR (2004-05 to 2013-14) A of Revenue Receipts 12.98 B of Tax Revenue 15.13 C of Non- Tax Revenue 11.32 D of Total Expenditure 11.80 E of Capital Expenditure 10.99 F of Revenue Expenditure on Education 12.80 G of Revenue Expenditure on Health 10.41 H of Salary and Wages 13.10 I of Pension 17.08 Gross State Domestic Product (GSDP) 2013-14 82,585 GSDP CAGR (2004-05 to 2013-14) 13.12

Trends in Gross State Domestic Product (GSDP) 2009-10 2010-11 2011-12 2012-13 2013-14 Gross State Domestic Product (In crore) 48,189 57,452 64,957 73,710 82,585 Growth rate of GSDP (In per cent) 16.16 19.22 13.06 12.88 12.04 Source: Economic and Statistics Department, Himachal Pradesh and Central Statistics Office

Comparative Growth Rate of H.P. and National Economy Plan Period Average Annual Growth Rate of Economy at Constant Prices Himachal Pradesh All India 1. 2. 3. 2009-10 (+) 8.1 (+) 8.6 2010-11 (+) 8.8 (+) 8.9 2011-12 (+) 7.3 (+) 6.7 2012-13 (+) 6.1 (+) 4.5 2013-14 (+) 6.2 (+) 4.9

Movement of Per Capita Income Per Capita Income (In Rs.) Year Per Capita Income (In Rs.) (At Constant Prices) Himachal All India 1. 2. 3. 2009 - 2010 43492 34442 2010 - 2011 46682 36924 2011- 12(P) 49203 40479 2012-13(Q) 51730 41828 2013- 14(A) 54494 44233

Percentage Contribution of Sectoral State Domestic Product at Current Prices Year Primary Secondary Tertiary 1970-71 58.56 16.73 24.71 2013-14 19.75 36.50 43.75

Structure of the Economy percent Secondary sector contributes 41% to the State GSDP whereas it employs only 1.65% of the total workers. In contrast, primary sector contributes 19 per cent to the State GSDP & 63 % workers are dependent on this sector.

Total receipts (Rs. 20,851 crore) Revenue Receipts (Rs. 15,711 crore) Capital Receipts (Rs. 4,067 crore) Net Public Account Receipts* (Rs. 1,073 crore) Remittances (Rs.(-) 23 crore) Small Savings and Provident Funds (Rs. 887 crore) Deposits and advances (Rs. 207 crore) Suspense and Misc. (Rs. One crore) Reserve Fund Tax Revenue (Rs. 5,121 Crore) Non-Tax Revenue (Rs. 1,785 Crore) State share of union taxes and duties (Rs. 2,491 crore) Grant in aid from GoI (Rs. 6,314 crore) Debit Receipts (Rs. 4,050 crore) Non dedit receipts / Recovery of loans and advances (Rs. 17 crore) Tax on sales Trade etc. (Rs. 3,141 Crore) State Excise(Rs.952 crore) Taxes & duties on Electricity(Rs. 191 Crore) Taxes on Vehicles (Rs. 208 Crore) Stamps & Registration fees (Rs. 188 Crore) Others (Rs. 441 Crore) Market Loans and Borrowings (Rs. 3,362 crore) Ways and Means Advances and Overdrafts (Rs. 629 crore) Loans & Advances from GoI (Rs. 59 crore)

RECEIPT COMPOSITION 2013-14 Total Receipts Rs. 20,851 Crore

REVENUE RECEIPT COMPOSITION -2013-14 Total Revenue Receipts-Rs 15,711 Crore

Trends in Revenue Receipts relative to GSDP 2009-10 2010-11 2011-12 2012-13 2013-14 Revenue receipts(RR) (Rs.in crore) 10,346 12,711 14,543 15,598 15,711 Rate of growth of RR (per cent) 11.15 22.86 14.41 7.25 0.72 RR/GSDP (per cent) 21.47 22.12 22.39 21.16 19.02 Buoyancy Ratios Revenue Buoyancy w.r.t GSDP 0.69 1.19 1.10 0.56 0.06 State’s Own Taxes Buoyancy w.r.t GSDP 1.17 0.98 (-)0.03 1.25 Revenue Buoyancy with reference to State’s own taxes 1.23 1.02 1.12 (-)21.97 0.05

Growth rate of Non-Tax Revenue (NTR) (Rs. In Crore) Revenue Head 2009-10 2010-11 2011-12 2012-13 2013-14 Interest receipts 77 (-1) 70 (-9) 115 (64) 70 (-39) 119 (70) Dividends & profits 74 (-17) 64(-14) 86 (34) 100 (16) 103 3) Other non-tax receipts of which 1,633 (3) 1,561(-4) 1,714 (10) 1,207 (-30) 1,563 (29) Misc. General Services 1 (-80) 2 (50) 40 (1900) 9 (-78) 6 (-33) Education, Sports, Arts and Culture 84 (47) 82 (-2) 104 (27) 112 (8) 157 (40) Forestry and Wild life 72 (31) 65 (-10) 107 (65) 64 (-40) 358 (459) Other Administrative Services 17 (21) 31 (82) 26 (-16) 46 (77) 26 (-43) Public Works 31 (35) 35 (13) 42 (20) 40 (-15) 35 (-13) Water Supply and Sanitation 20 (11) 26 (30) 31 (19) 34 (10) 37 (9) Others 1,408 (-1) 1,320 (-6) 1,364 (3) 902 (-34) 944 (5) Total 1,784 (2) 1,695 (-5) 1,915 (13) 1,377 (-28) 1,785 (30) Figures in the parenthesis indicate percentage growth/deficit over the previous year

Grants-in-aid from GoI (Rs. In Crore) Particulars 2009-10 2010-11 2011-12 2012-13 2013-14 Non-Plan Grants 2,052 2,634 2,647 2,526 2,025 Grants for State Plan Schmes 2,731 2,680 3.342 4,179 3,765 Grants for Central Plan Schemes 5 1 27 28 17 Grants for Centrally Sponsored Plan Schemes 339 343 505 580 507 Total 5,127 5,658 6,521 7,313 6,314 Percentage of increase over previous 14.64 10.36 15.25 12.15 (-) 13.66 Percentage of Revenue Receipts 50 45 47 40

Fiscal Responsibility and Budgetary Management (FRBM) Act. Himachal Pradesh FRBM Act 2005 and FRBM Rules 2005 were framed to make the State Government accountable for ensuring prudence in fiscal management and to ensure fiscal stability, sustainable debt management consistent with fiscal stability and greater transparency. The medium term Fiscal Statement and Fiscal policy Strategy Statement set forth the fiscal objectives, strategic priorities of the State Govt. and three-year rolling target for fiscal management. An Act to achieve Revenue Surplus. Prudential debt policies. Transparency in Fiscal Management.

Achievement Under FRBM ACT Parameters of FRBM Fiscal Indicator Achievement 2014-15 2015-16 1. Revenue Deficit Revenue Deficit/ Surplus as percentage of Revenue Receipt -8.13 0.20 2. Fiscal Deficit Fiscal deficit as percentage of Gross State Domestic Product. -4.01 -2.91 3. Outstanding Debt Total outstanding Debt as percentage of Gross State Domestic Product. 36.54 33.83 4. Risk Weighted Guarantees Total outstanding Guarantees as percentage of Revenue Receipts 23.30 18.72

Experience of FRBM Act Implementation Still limited awareness of the Act. Art. 293 ceiling by Government of India has been an effective tool for GoI to ensure debt sustainability. No cap on Government Guarantees. Off Budget borrowings. Limited Legislative Scrutiny. Shifting of Goal Post .Act amended in 2011 to eliminate Revenue deficit by 2011-12. Independent Mechanism was to be set up to Review Fiscal reform path.

Experience of FRBM Act Implementation ……..Continued Non compliance of section 5 of the Act. Special provision allows Government to breach Revenue/ Fiscal deficit together. No Judicial intervention/PIL. No provision to penalize Government. Mostly an indicative Financial Legislation.

Fiscal Indicators- Rolling Targets (Rs. In Crore) Fiscal Indicator Current year Revised Estimates 2014-15 Ensuing year Target Budget Estimates 2015-16 Y Target for next three years Y+1 2016-17 Y+2 2017-18 Y+3 2018-19 1. Revenue Receipts 18906.96 23534.53 26807.87 29815.51 33031.64 2. Revenue Expenditure 20445.03 23487.69 26735.55 29771.61 32961.15 3. Revenue Deficit/ Surplus as percentage of Revenue Receipts -8.13 0.20 0.27 0.15 0.21 4. Fiscal deficit as percentage of Gross State Domestic Product. -4.01 -2.91 -2.83 -2.81 -2.80 5. Tax revenue as percentage of Gross State Domestic Product. 5.96 5.61 5.48 5.35 5.23 6. Total outstanding Debt as percentage of Gross State Domestic Product. 36.54 33.83 32.56 31.43 30.42 7. Total outstanding Guarantees as percentage of Revenue Receipts 23.30 18.72 State Government would try to keep this at the level of 2015-16 B.E in future. 8. Gross State Domestic Product. 95587 112934 128508 146229 166394

(Rs. In Crore) Time Series Data on HP Finances Part-A: Receipts 2009-10 2010-11 2011-12 2012-13 2013-14 1. Revenue Receipts 10,346 12,711 14,543 15598 15711 (i) Tax Revenue 2,574 (25) 3,643 (29) 1,108(28) 4,626(30) 5,121(33) Taxes on Sales, Trade, etc. 1,487 (58) 2,101 (58) 2,477(60) 2,728(59) 3,141(61) State Excise 500 (19) 562 (15) 707(17) 810(18) 952(19) Taxes on vehicles 134( 5) 163 (4) 176(4) 196(4) 208(4) Stamps and Registration fees 113 (4) 133 (4) 155(4) 173(4) 188(4) Taxes and Duties on electricity 39 (2) 302 (8) 185(5) 262(6) 191(4) Land Revenue 15 (1) 5 (0.1) 18(11) 24(-) 10(-) Taxes on Goods and Passengers 89 (3) 93 (3) 94(2) 101(2) 105(2) Other Taxes 197 (8) 284 (8) 296(7) 332(7) 326(6) (ii) Non Tax Revenue 1,784 (17) 1,695 (13) 1,915(13) 1,377(9) 1,785(11) (iii) State’s share of Union taxes and duties 862 (8) 1,715 (13) 1,999 (14) 2,282 (14) 2,491 (16) (iv) Grants in aid from Government of India 5,126 (50) 5,658 (45) 6,521 (45) 7,313 (47) 6,314 (40) 2. Miscellaneous Capital Receipts - 646 3. Recoveries of Loans and Advances 34 73 25 21 17 4. Total Revenue and Non debt capital receipts (1+2+3) 10,380 13,430 14,568 15,619 15,728

Time Series Data on HP Finances ……. (Continued) 2009-10 2010-11 2011-12 2012-13 2013-14 5. Public Debt Receipts 2,553 2,411 1,984 3,371 4,050 Internal Debt (excluding Ways and Means Advances and Overdrafts) 2,484 (97) 2,372(98) 1,904(96) 3,239(96) 3,362 Loans and Advances from Government in India - 629 Net transactions under Ways and Mans advances and overdrafts 69(3) 39 80(4) 132(4) 59 6. Total Receipts in the Consolidated Funds (4+5) 12,933 15,841 16,552 18,990 19,778 7. Contingency Fund Receipts 8. Public Account Receipts 6,821 8,507 9,237 9,146 10,300 9. Total Receipts of the State (6+7+8) 19,754 24,348 25,789 28,136 30,078 Part-B Expenditure / disbursement 10. Revenue Expenditure 11,151 13,946 13,898 16,174 17,352 Plan 1,238(1)0 1,652(12) 1,701(12) 2,079(13) 2,387(14) Non-Plan 9,913(89) 12,294(88) 12,197(88) 14,095(87) 14,965(86) General Services (including interest payments) 4,377(39) 5,279(38) 5,690(41) 6,618(41) 7,047(41) Social Services 3,902(35) 4,979(35) 5,147(37) 6,131(38) 6,706(39) Economic Services 2,868(26) 3,682(26) 3,049(22) 3,418(21) 3,590(20) Grants-in aid and contributions 4(-) 6(-) 12(-) 7(-) 9(-)

Time Series Data on HP Finances …. (Continued) 2009-10 2010-11 2011-12 2012-13 2013-14 11. Capital Expenditure 1,943 1,789 1,810 1,955 1,856 Plan 1,895(98) 1,774(99) 1,764(97) 1,859(95) 1,815(98) Non-Plan 48(2) 15(1) 46(3) 96(5) 41(2) General Services (including interest payments) 63(3) 73(4) 74(4) 81(4) Social Services 610(31) 611(34) 372(21) 436(22) 478(26) Economic Services 1,270(65) 1,105(62) 1,3665(75) 1,445(74) 1,297(70) 12. Disbursement of Loans and Advances 70 227 493 469 531 13. Total (10+11+12) 13,164 15,962 16,201 18,598 19,739 14. Repayment of Public Debt 867 870 1,128 2,117 1,704 Internal Debt (excluding Ways and Means Advances and Overdrafts 811 808 1,034 2,056 1,467 Net transactions under Ways and Means Advances and Overdraft - 172 Loans and Advances from GoI 56 62 94 61 65 15. Total disbursement out of Consolidated fund (13+14+15) 14,031 16,832 17,329 20,715 21,443

Time Series Data on HP Finances…..(Continued) 2009-10 2010-11 2011-12 2012-13 2013-14 Part C. Deficits Revenue Deficit (-)/Revenue Surplus (+) 1-10) (-) 805 (-) 1,235 (+) 645 (-) 576 (-) 1,641 Fiscal Deficit (-)/Fiscal Surplus (+) (4-13) (-)2,784 (-) 2,532 (-) 1,633 (-) 2,979 (-)4,011 Primary Deficit (-) Surplus (+) 21+23) (-) 828 (-) 582 (+) 497 (-) 609 (-) 1,530 Part D: Other data Ways and Means Advances/ Overdraft - 629 Ways and Means Advances availed (days) 10 Overdraft availed (days) 01 Gross State Domestic Product (GSDP)@ 48,189 (16.16) 57,452 (19,.22) 64,957 (13.06) 73,710 (12.88) 82,585 (12.04) Outstanding fiscal liabilities (year end ) 23,713 26,415 28,228 30,442 33,884

RESOURCE MOBILISATION 2009-10 2010-11 2011-12 2012-13 2013-14 Own Tax revenue/GSDP 0.05 0.06 Own Non-Tax Revenue /GSDP 0.04 0.03 0.02 Central Transfers/GSDP

IMPORTANT FISCAL INDICATORS 2009-10 2010-11 2011-12 2012-13 2013-14 Revenue deficit (surplus)/GSDP (-) 1.67 (-) 2.14 (+) 0.99 (-) 0.78 (-) 1.99 Fiscal deficit/GSDP (-) 5.78 (-) 4.41 (-) 2.51 (-) 4.04 (-) 4.86 Primary Deficit (surplus)/GSDP (-) 1.72 (-) 1.01 (+) 0.77 (-) 0.83 (-) 1.85 Revenue Deficit/Fiscal Deficit (-) 28.92 (-) 48.78 NA 19.34 40.90 Primary Revenue Balance/GSDP (ratio) .022 .011 .041 .023 009 Management of Fiscal Liabilities Fiscal Liabilities/GSDP 0.50 0.46 0.43 0.41 Fiscal Liabilities/RR 2.29 2.07 1.94 1.95 2.16 Primary deficit vis-à-vis quantum spread (-)0.50 (-) 0.21 0.36 (-)0.44 (-) 1.16

IMPORTANT FISCAL INDICATORS…..Continued 2009-10 2010-11 2011-12 2012-13 2013-14 Other Fiscal Health Indicators Return on Investment 73.49 64.11 85.65 100.09 103.42 Balance from Current Revenue (Rs. In crore) (-) 6442 (-) 2607 (-)1529 (-) 3284 (-) 3544 Financial Assets/ liabilities 0.67 0.66 0.70 0.68 Revenue Expenditure: Basic Parameters Revenue Expenditure (RE) (Rs. In crore) 11,151 13,946 13,898 16,174 17,352 Rate of Growth (per cent) RE 18.15 25.06 (-) 0.34 16.38 7.28 Non-Plan Revenue Expenditure (NPRE) (Rs. In crore) 9,913 12,294 12,197 14,095 14,965 Rate of Growth (percent) NPRE 15.79 24.01 (-) 0.79 15.56 6.17 Plan Revenue Expenditure (Rs. In crore) 1238 1652 1701 2079 2387 Rate of growth (per cent) PRE 41.16 33.44 2.97 22.22 14.81 NPRE/GSDP(per cent) 20.57 21.40 18.78 19.12 18.12 RE/TE2 (percent) 85.16 88.63 85.78 86.97 90.34

ANALYSIS OF EXPENDITURE S.O.E WISE EXPENDITURE AS PERCENTAGE TO TOTAL (Rs. In Crore) S.O.E WISE EXPENDITURE AS PERCENTAGE TO TOTAL Sr. No SOE-wise detail Actuals 2013-14 %age to Total Budget Estimates 2014-15 Budget Estimates 2015-16 1 SALARIES 6278.38 29.28 7646.97 32.38 8284.71 29.23 2 WAGES 198.31 0.92 154.55 0.65 152.80 0.54 3 GRANT IN AID(salary) 558.46 2.60 509.93 2.16 874.31 3.09 4 GRANT IN AID(Non Salary) 448.30 2.09 455.20 1.93 1473.77 5.20 5 GRANT IN AID (Capital Assests) 431.13 2.01 379.71 1.61 530.30 1.87 6 PENSIONS 2855.08 13.31 3496.08 14.81 4040.72 14.26 7 INTEREST 2480.86 11.57 2750.00 11.65 2950.00 10.41 8 MAINTENANCE 1503.75 7.01 1839.87 7.79 1837.81 6.49

EXPENDITURE ANALYSIS…..Continued 9 MAJOR WORKS 1539.40 7.18 1595.27 6.76 2604.39 9.19 10 INVESTMENTS 267.68 1.25 326.82 1.38 311.04 1.10 11 LOANS 2235.32 10.42 1877.99 7.95 1900.26 6.71 12 SUBSIDY 467.15 2.18 792.49 3.36 939.3 3.31 ESTABLISHMENT RELATED 335.40 1.56 312.81 1.32 339.25 1.20 a) Travel Expenses 42.16 0.20 36.50 0.15 40.08 0.14 b) Office Expenses 111.59 0.54 124.59 0.53 128.12 0.45 c) Motor Vehicles 46.87 0.22 28.29 0.12 0.13 d) M.R 117.79 0.55 109.71 0.46 115.22 0.41 e) Liveries 2.12 0.01 2.13 6.22 0.02 f) Rent Rates & Taxes 11.13 0.05 10.26 0.04 11.73 g) Transfer Expenses -0.26 0.00 1.33 OTHERS 1844.45 8.60 1475.67 6.25 2099.97 7.41 TOTAL 21443.67 100.00 23613.36 28338.63

RECENT TRENDS IN PUBLIC FINANCES Plan Assistance stopped due to Planning Commission abolition. CSS transfers to be reduced. 14th Finance Commission transfers to the tune of Rs. 72,000 crore (Rs. 28,000 crore of Central Taxes and Rs. 40,625 in RDG.) 32% to 42% increase in State Share has been a negative Sum game for Special Category States. Special Category Status under question. Fiscal Space under Stress. Tax/Non Tax revenue to GSDP continue to be very low.

DEVELOPMENT STORY OF THE STATE AND FUTURE CHALLENGES Economy is more diversified now Public Infrastructure has developed substantially. Maintenance of Public Assets an important challenge. Govt. Sector employment is squeezed. Unemployment/Skilling a challenge. Quality of education needs focus. Focus on Power Sector, Agriculture diversification and Tourism to increase growth. To increase Tax to GSDP ratio to strengthen revenue base.

Thank You