Uttarakhand expected to have higher revenue surplus of Rs 41 billion: India Ratings

Dehradun: The hill state of Uttarakhand is expected to have a higher revenue surplus of over Rs 41 billion in the financial year 2022-23 which will give the state a leeway in spending more on capital expenditure, showed an analysis of the state budget by rating agency India Ratings. India Ratings and Research, which is part of Fitch Group, expects the fiscal deficit of Uttarakhand in the current financial year to come down to 2.1% of the state GDP (GSDP), which is lower than the budgeted 3.1% of the GSDP.

According to the rating agency, this is attributed to the optimistic assumptions regarding revenue and capital expenditure and conservative assumptions regarding nominal GSDP growth and revenue receipts in the year. These factors could result in an improvement in the fiscal deficit, which is already well within the limits prescribed by the 15th Finance Commission and agreed upon by the union government.

The Centre has set the fiscal limit at 3.5% of the state GDP and an additional half a percent subject to carrying out some reforms at state level. Uttarakhand’s revenue surplus in the current financial year is budgeted at Rs 24.61 billion, which is 0.9% of the state GDP, which appears to be on the lower side, according to the agency estimates.

“The agency believes that the revenue surplus is likely to be at around 1.5% (Rs 41 billion) of the state GDP in the current financial year due to the pessimistic assumptions regarding tax revenue,” India Ratings said in a statement sent to ETV Bharat. It said that the higher revenue surplus would provide the state with the fiscal leeway to ramp-up its expenditure on capital and productive assets.

Building on the revenue surplus registered during the first Covid year (FY 2020-21), when it was estimated to be six-year high, the state of Uttarakhand has estimated its revenue surplus to be a nine-year high in the second Covid year (FY 2021-22) at around 0.88% of the GSDP. As per the revised estimate, it is expected to be Rs 22.35 billion.

The significant improvement in the last financial year came on the back of the faster-than-expected recovery of the economy which helped the revenue receipts of the state grow by 14.4% on a year-on-year basis, which was greater than the revenue expenditure growth of 11.8% as per the revised estimates. This helped the state in curtailing its fiscal deficit to an eight-year low of 1.93% of the state GDP (GSDP), as per the revised estimates for the last financial year.