Freebies Debate: The announcement of Rewari, which is given free of cost by different political parties, can prove to be fatal for the economy in the coming times. In a report, it has been suggested that a committee set up by the Supreme Court in this context limit such expenditure to one percent of the state’s gross domestic product (GDP) or tax collection of the state. In the midst of an ongoing debate over the free revri given by political parties, a report by economists from the State Bank of India said
In this report written by Soumya Kanti Ghosh, Chief Economic Adviser (Group) of State Bank of India, examples of three states have been given. It states that the annual pension liability in Chhattisgarh, Jharkhand and Rajasthan, which come under the category of poor states, is estimated at Rs 3 lakh crore. According to the report, the pension liability as a percentage of the tax revenue of these states is quite high. It is 217 percent in the case of Jharkhand, 190 percent in Rajasthan and 207 percent in Chhattisgarh.
In the states which are considering to re-implement the old pension system, the pension liability in the ratio of tax revenue in Himachal Pradesh will be 450 percent, in the case of Gujarat, 138 percent and in Punjab 242 percent. Beneficiaries do not make any contribution in the old pension system.
According to Ghosh, according to the latest information available, the share of debt in the state budget has reached about 4.5 percent in 2022. Under this, the debt is raised by the public sector units and which is guaranteed by the state governments. Such guarantees have reached a significant percentage of GDP in various states.
It has been said in the report that the committee constituted by the Supreme Court can decide the scope for the freebies to be given. This can be a percentage of the Gross State Domestic Product (GSDP) or a state’s own tax collection or a percentage of the state’s revenue expenditure for welfare schemes.
The share of such guarantee is 11.7 per cent of GDP in case of Telangana, 10.8 per cent in Sikkim, 9.8 per cent in Andhra Pradesh, 7.1 per cent in Rajasthan and 6.3 per cent in Uttar Pradesh. The share of the power sector in this guarantee is about 40 percent. Other beneficial schemes include irrigation, infrastructure development, food and water supply.
According to the report, the promises made by various political parties in the states where elections are to be held are 1-3 per cent and 2-10 per cent respectively in Himachal Pradesh and Gujarat as a percentage of revenue receipt and tax revenue of the state. In this 5 to 8 percent is 8-13 percent.
Among the states that have adopted or promised the old pension system without any contribution to the beneficiaries, this tax as a percentage of revenue is 450 percent in Himachal Pradesh, 138 percent in Gujarat, 207 percent in Chhattisgarh, 190 percent in Rajasthan, 217 in Jharkhand. percent and 242 percent in Punjab.
The combined liability of the states that have adopted or promised to implement the old pension system was Rs 3,45,505 crore in the financial year 2019-20. This will be 1.9 per cent in Chhattisgarh as a percentage of GSDP, while incurring an additional burden of Rs 60,000 crore which was Rs 6,638 crore in 2019-20. In the case of Jharkhand it was Rs 6,005 crore. This is 1.7 per cent of its GSDP and is projected to increase by Rs 54,000 crore.
In Rajasthan, it was Rs 20,761 crore, which is expected to increase by six per cent of GSDP and to Rs 1.87 lakh crore. In Punjab it was Rs 10,294 crore and it is expected to increase to 3 per cent of GSDP. The total burden will increase by Rs 92,000 crore. In Himachal Pradesh it was Rs 5,490 crore. Its GSDP is estimated to increase by 1.6 percent and Rs 49,000 crore. The pension burden in Gujarat was Rs 17,663 crore in the financial year 2019-20. It is estimated to jump to 5.1 percent of the state GDP. There will be an increase of Rs 1.59 lakh crore in this.
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