Fiscal performance of West Bengal as a General Category States in India : Is it dynamics ?

doi:10.21203/rs.3.rs-2705699/v1

This study has tried to explore the fiscal performance of West Bengal and compare it with that of other general states in India. It is very important to be aware of the fiscal performance of a country or state. In 2003, India established the Fiscal Responsibility and Budget Management Act (FRBMA), a fiscal framework with principles to promote long-term macroeconomic stability. Achieving intergenerational justice in fiscal management is critical. All of these programs and laws attempt to boost revenue, lower the deficit, and ensure fiscal sustainability at the federal and state levels for both macroeconomic and microeconomic stability. In this paper, three indicators have been used for the calculation of fiscal performance: the Indicator of Deficit Index (IDI), the Own Revenue Effort Index (OREI) and the Debt and Expenditure Index (EDSI). The fiscal performance of West Bengal among the 17[1]general category states is not satisfactory; rather, it occupies the worst position among states and the performance did not improve over the period of time . Basically, this is due to low tax collection by the state and a higher amount of expenditure. Since the performance did not change significantly hence the fiscal performance of West Bengal is not dynamic.

[1] Although there are 18 general category states in India, I have considered 17 general category states because Telegana state was formed in 2013 . My study paper has tried to explore the fiscal performance of West Bengal from 2003–2004 to 2020–2021.

Fiscal performance

Own revenue effort

Deficit

Debt and services

Dynamic

State finance in India has traditionally received little attention in the literature on public finance, but union finance has received a lot of attention from academics and policymakers. But at the present time, considerable emphasis is being laid on the financial condition of the state and various types of research are being done. It is proven that the economic growth of a country depends on the financial performance of the state. The condition of the economy's finances could be structural, general, or the result of a subsequent modification to the tax code. In terms of a summary of fiscal performance, such as the budget deficit, borrowing, debt, or a significant component, etc., the fiscal rule is described as an amendment to fiscal policy (Kopits and Symansky, 1998).

The financial performance of a country and state is very important issue because the financial performance gives an idea about the economic activities there.i.e to preserve the fiscal efficiency in the centre, the subnational level's fiscal performance is crucial.Financial capacity is a critical factor in the type of infrastructure improvements required to accelerate economic development.Since the 1990s, policymakers and researchers in India have been deeply concerned about the country's declining fiscal health, both at the national and state levels.In light of this, the Eleventh Finance Commission (EFC) for the first time suggested a fiscal reform incentive programme with the aim of preserving fiscal discipline at the state level.The Twelfth Finance Commission (TFC) introduced plans for state fiscal correction when it became apparent that fiscal indiscipline was out of control. The Indian government initiated quickly to assist fiscal reforms at the State level and the concept of "incentivizing reforms" took roots (World Bank, 2004).A number of other significant measures, such as state-level Fiscal Responsibility Legislations (FRLs) and different institutional changes, were also carried out.Additionally, in 2003, India implemented the Fiscal Responsibility and Budget Management Act (FRBMA), a fiscal framework with rules to maintain long-term macroeconomic stability, it is important to achieve intergenerational equity in fiscal management.These allinitiatives and regulations aim to increase revenue, reduce the deficit, and maintain fiscal sustainability for both macroeconomic and microeconomic stability at the federal and state levels.

There are 28 States in India which are grouped into two categories : 1. General Category States and 2. Special Category States. General Category States are Andhra Pradesh ,Bihar ,Chhattisgarh ,Goa , Gujarat, Haryana, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, West Bengal and Telangana. Although Telangana State has formed in 2013-14 ,hence I did not take into account in our discussion because all data from 2003-04 could not available . Rest of states in India are Special Category states .Generally, Special category States receive special grant from central .

West Bengal is an important state of India with a total population of 91276000 as per 2011 census.In terms of population, West Bengal is one of the most populous states in India with the highest population density and the rate of population growth is accelerating considerably as the population growth rate of West Bengal as per 2011 census is 13.84%.So everyone agrees that there is population pressure in West Bengal.185.0 lakh people live below poverty line(BPL) in West Bengal and where as 20%[1] people of total populationlive below poverty line in this State.Which is very worrying for State. Although UNICEF targets in its Sustainable Development Goals that It must eradicate poverty by 2015, this is not the case for all UNICEF member countriesPer capita net state domestic product of this state is Rs.72202[2].

In such a situation, it is very necessary to eradicate poverty and develop other economic and social sectors of West Bengal, but it is also important in terms of how advanced the financial sector is, because the more the improvement in the financial performance, the more the economic infrastructure barriers such as poverty, unemployment and other economic infrastructure barriers in West Bengal will be reduced by implementing various social projects. It will become possible to solve the problems if the fiscal performance is favourable to the State.

[1]As per 2011-12 census (Based on Mixed recall period ofConsumption)(rbi.com)

[2] As per 2020-21 financial year ( Constant Price )

Numerous studies on the fiscal performance of the central government's and state governments' budgets exist, including those by Sarma (2003), the Chelliah Committee (1994), and the World Bank Study (1996-97) Some of the well-known studies include Rao (2004), Zaidi (2002), Sivram (2003), Chaitanya (2006), RBI Study (2004), and Dholakia (2005). Numerous of these studies are in-depth, theoretical in character, focused on giving a macro picture of all the states' or significant states' budgetary positions, and provided in time series analysis form. There are, however, a few well-known works that are only available in certain states. For instance, Zaidi's 2002 report focuses on Uttar Pradesh's financial situation between 1991 and 1999-2000.Similar to that, Andhra Pradesh is the focus of Chaitanya's (2006) study.

Bahl, R., Sethi, G., & Wallace, S. (2009) have tried to explore the fiscal performance of rural West Bengal in their research paper“West Bengal: Fiscal Decentralization to Rural Governments: Analysis and Reform Options”. This paper examines the financial health of West Bengal's rural local administrations. The creation of a thorough fiscal information system for all rural local governments is a specific objective of ours, and we intend to use the information it collects to assess the intergovernmental financial structure of the state. Given the need to implement policies in response to constitutional amendments requiring fiscal decentralisation and to support efforts by the federal and state governments to use the Panchayat Raj Institutions (PRIs) as a key component of their poverty alleviation strategy, the work is of significant policy significance.

Akram, V., & Rath, B. N. (2021) havetried to explain the fiscal performance of Indian States in their research paper“Understanding the evolution of fiscal performance of Indian states.”Thefiscal performance of 21 Indian states from 1980–1981 to 2017–2018 is examined in this study. This study uses a widely-used multidimensional composite index as a starting point. To evaluate the fiscal performance, this study uses data envelopment analysis (DEA). According to the research, Odisha is the top-ranking Indian state and has had the best fiscal performance in recent years. On the other hand, according to our findings, Punjab had the worst performance among the states from 2015–16 to 2017–18. From a policy standpoint, the least performing states ought to receive more attention from the federal government and should be allowed to adopt the best policies from other states, which might help them with their fiscal performance.

Jha, R., Mohanty, M. S., Chatterjee, S., &Chitkara, P. (2000) have tried todetermine the pure tax efficiency of 15 important Indian states (Andhra Pradesh, Assam, Bihar, Gujarat, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, and West Bengal) for the years 1980–1981 to 1992–1993, while allowing for variations in efficiency over time and between states in their research paper “Tax efficiency in selected Indian states” . The design of central grants is found to have a moral hazard issue, as bigger transfers from the federal government to state governments decrease the effectiveness of these states' tax collection. The less impoverished states are more effective at collecting taxes. For different years, there is no convergence in the state rankings based on tax efficiency. A measure of overall tax efficiency is calculated.

Dash, A. K. (2011) has tried to measure the fiscal performance of Tripura among special category states of India in his research paper“Fiscal performance of special category states in India: A case study of Tripura state finance” The Tripura Fiscal Performance Indicator is a composite index that was created by the publication (TFPI). It has been noted that since the FRBM Act was put into effect, overall fiscal performance is improving. The best fiscal performance year was 2007-2008. However, to preserve long-term financial stability, the state must continue its fiscal restraint in terms of managing the deficit and increasing its own revenue.

The main objective of this paper is to explore the fiscal performance of West Bengal in the light of deficit management, own effort of revenue collection and finally In order to determine if the state's fiscal performance is improving or not after executing the fiscal reform programme, it is finally important to look at how the state is sustaining its spending and paying off debt.That is, it is examine whether the fiscal performance of the state is dynamic or not over the period (2003-2004 to 2020-2021).i.ehas the fiscal performance of the state changed over time ? Also to see where the financial situation of West Bengal stands relative to the 17 general category states of West Bengal though Telangana state will not be in our discussion as it was formed in 2013 but our discussion is mainly from 2003 to 2021.

The data have been collected mainly from Hand Book of Statistics on State Government Finances-2021 published by the Reserve Bank of India.

The following approach is followed to explore the fiscal performance of West Bengali.e West Bengal fiscal performance Index (WBFPI) .This approach is followed by the approach of Archana Dholakia(2005).

The WBFPI is made up of three distinct indices. They are as follows:

Indicator of Deficit Index(IDI)
Own Revenue Effort Index (OREI) and
Debt and Expenditure Index (EDSI)

Although each indicator indices are consisting of fiscal indicators.(1) Indicator of Deficit Index(IDI) consist of i) Gross Fiscal Deficit as a percentage of Total Expenditure (GFD/TEX), ii) Revenue Deficit as a percentage of Net Fiscal Deficit(RD/NFD) and iii) Capital Outlay as a percentage of Net Fiscal Deficit(CO/NFD).(2) Own Revenue Effort Index (OREI) is consist of i) Own Tax Collection as percentage of Revenue Expenditure (OT/REX) and ii) Own Non-Tax Collection as a percentage of Revenue Expenditure (ONT/REX) and (3)Debt and Expenditure Index (EDSI)is consist of i) Non-Developmental Revenue Expenditure as a percentage of Revenue Receipts(NDRE/RR),ii) Interest Payment as a percentage of Revenue Expenditure(IP/REX) and iii) Debt Repayment as a percentage of Central Fiscal Transfers received by the state(DR/GCFT)

Composite index is constructed by following the procedure

We have used the methodology developed by Morris and Mc Alpin in 1982 which is used to develop Physical Quality of Life Index (PQLI)for construction of the Fiscal Performance composite Index.

In the construction process first of all above mentioned eight key fiscal percentage are calculated (See Appendix Table-1). Secondly, each fiscal Indicator Index has been calculatedby taking average value for each year i.e., for 2003-04 to 2020-21 and converted eachindicesin performance indexfollowing the methodology of Morris and McAlpin (Appendix Table-2).

Performance index for Indicator of Deficit Index(IDI) = {1-(Av-Min)/(Max-Min)}×100

Own Revenue Effort Index (OREI) ={(Av-Min)/(Max-Min)}×100

Debt and Expenditure Index (EDSI) ={1-(Av-Min)/(Max-Min)}×100

Here, Av stand for actual value , for calculation of performance in terms of Deficit, Debt and expenditure , We have used {1-(Av-Min)/(Max-Min)}×100 formula because higher value of these indices reveal worse fiscal performance for a state . But in our discussion, we want to show better fiscal performance.Hence we have used above formula. Then calculate the rank of each statesamong 17 general category states in India for each year.

Because choosing only one indication to measure fiscal performance is not justifiable, employing a multiple indicator model to assess fiscal performance is justified. This amounts to ignoring other crucial fiscal factors, such as fiscal/GDP or revenue deficit/revenue receipts. It also disregards the qualitative components of fiscal parameters, such as how and on what the government spends, the magnitude of debt, the impact of interest payments, and how the fiscal deficit is financed (Dholakia and Solanki, 2001). Additionally, it raises the likelihood of measurement inaccuracy (Dholakia, 2005).

This is a simple way to assess the state's success because improving the value of an indicator index inevitably improves fiscal performance, and vice versa. The composite index is calculated as a simple average of the indicator indices after the indicator index has been formed.

Composite Index= ∑ Individual Indicator Index of each year/ Number of Individual Indicators.

The three indicator indices of West Bengal for the 18 years under study are demonstrated in Table1 which reveal the trend of each indices over the period of time and therelative position of West Bengal among 17 states has been shown in Table 2 in terms of three fiscal indices.According to the value of composite index the years are ranked as the year with highest index value is 1 and the year with lowest value is 17 per year.

4.1 Fiscal Performance Indicators:

Table :1

Rank intra state of West Bengal
Year	GFD as a percentage of GSDP	Rank	RD as a percentage of GSDP	Rank	Outstanding Liabilities as a percentage of GSDP	Rank
2003-04	6.800223	1	4.834657	2	41.38519	5
2004-05	5.104086	3	3.944284	4	42.88007	2
2005-06	4.169473	6	3.209625	6	42.27758	3
2006-07	4.367899	4	3.183255	7	43.72447	1
2007-08	3.806563	9	2.721359	9	41.45581	4
2008-09	3.965579	7	4.301893	3	39.89618	6
2009-10	6.255008	2	5.410143	1	37.71406	8
2010-11	4.23682	5	3.746538	5	38.07497	7
2011-12	3.351216	11	2.75801	8	36.51604	9
2012-13	3.173656	12	2.289866	12	35.40797	11
2013-14	3.587516	10	2.67705	10	33.41678	18
2014-15	3.808063	8	2.386497	11	36.06971	10
2015-16	2.620219	17	1.140725	14	34.7824	13
2016-17	2.909365	15	1.843495	13	35.02699	12
2017-18	2.968196	14	1.006156	15	34.31723	14
2018-19	3.037878	13	0.943406	16	33.66387	16
2019-20	2.824587	16	0.510919	17	33.50956	17
2020-21	2.419877	18	0	18	34.26474	15
Source: State Finances: A Study of Budgets, Chapter-IV, Reserve Bank of India, Mumbai and Author calculation

Table 1 and Graph 1 show that the gross fiscal deficit (GFD) as a percentage of GDP was positive from 2003 to 2021. So the state has not maintained a fiscal surplus during the said period. But the gross fiscal deficit as a percentage of GSDP has declined over the period from 2003 to 2021 in West Bengal. Because the gross fiscal deficit as a percentage of GSDP has decreased from 6.8 to 5.1 in 2003–2004 to 2004-05 and further, it has declined to 4.16 in 2005–2006, although it has marginally increased to 4.36 in 2006-07. Again, it has slightly declined to 3.8 and 3.9 in 2007–08 and 2008–09, respectively. Increases of 6.25 percentage points were recorded in 2009-10. Again, it fell slightly from 2010-11 to 2012-13. But during 2013–14 to 2014–15, it further in2creased, after this period, it has increased from 2.6 to 3.03 up to 2018–19. Again, it has declined from 2.8 to 2.4 from 2019-20 to 2020-21. So from 2003-04 to 2020–2021, The gross fiscal deficit as a percentage of GSDP is calculated to be less than 7 percent, and the state had ups and downs in accumulating a fiscal deficit ranging from 2.62 to 6.80 percent. This trend reflects that the state is actively concerned about the reduction of the gross fiscal deficit in conformity with the achieved FRBM target.

Now if we look at Table 2, where the relative position of West Bengal among 17 general category states is observed in terms of fiscal indicators. The gross fiscal deficit as a percentage of GSDP rank has varied between 1 and 5 during 2003 to 2015 among the general category states. So it is a worrying issue for West Bengal because GFD as a percentage of GSDP is so high. It dropped in the following two years, 2015-16 and 2016-17.However, despite a significant decrease from 2019 to 2021, the relative position of states will be threatened in the next two years, namely 2017-18 and 2018-19, as ranks are 8 and 6, respectively.

So the GFD as a percentage of GSDP in West Bengal is quite alarming as it is the highest among the 17 states in the first half of the period but the value has recovered somewhat towards the end.

According to Table 1 and Graph 1, the state was unable to avoid revenue deficits during the period, whereas many other states in the same general category were able to achieve revenue surpluses. I have divided the entire period of time into five phases. In the first phase (2003-04 to 2007-08), the revenue deficit(RD) as a percentage of GSDP has gradually declined, but in the second phase (2008-09 to 2009–2010) it has further increased and it is worthy of mention that it is maximum, i.e 5.41% in 2009-10 period. Although in the next phase i.e Third third phase (2010-11 to 2012-13) it has fallen, which reveals improvement in the revenue deficit as a percentage of Gross state domestic product. It registered 2.67% in the fourth phase (2013-14 to 2015-16) of the first year (2013-14), which is marginally higher than just before the year, then it gradually decreased up to 2015-16. In the Fifth Phase (2016-17 to 2020-21), it has declined successively and minimum in 2020-21 where revenue deficit is 0. So West Bengal has been able to bring down the revenue deficit as a percentage of GSDP considerably. But as per Table-2, the relative position has shown in the performance of revenue deficit as a percentage of GSDP among the 17 general category states. From 2003-04 to 2011-12, it has occupied a first rank except in 2003-04 where it registered 4.83% and occupied the second position. So this issue of West Bengal in relation to other general category states is very worrying in this regard. A higher revenue deficit as a percentage of GSDP indicates that either revenue expenditure exceeds revenue earned by states or gross state product in some states is lower than in others. Thereafter, the relative position improved very little because the rank ranges from 2 to 7 up to 2018–19, although it has occupied the 10th and 9th ranks in 2019-20 and 2020-21 respectively. Hence, the revenue deficit in West Bengal is substantial, as shown in Table 2 where West Bengal lags far behind other general states in India.

Outstanding liabilities as a percentage of GSDP in West Bengal have varied from 33.50–43.72% from 2003 to 2021. The greater the state's outstanding liabilities, the worse the state's financial performance. I have divided the entire period of time into two phases where, in First first phase (from 2003 to 2008) it was greater than 40%, so when the outstanding liabilities as a percentage of GSDP is higher than 40 percent, the state had to face many financial problems. In the second phase (2009-20), it is less than 40% but greater than 33%, and it hasn't changed very much over the previous year and next year; it may have gone up a little and then down a little. After all, it can be said that the trend of outstanding liabilities as a percentage of GSDP has declined marginally. But as per Table − 2, West Bengal will be the worst performer in terms of outstanding liabilities as a percentage of GSDP among general category states in India. Because West Bengal ranked sixth for three years in a row (2003-04, 2004-05, and 2005-06), with 41.38%, 42.88%, and 42.27%, respectively. Following that, West Bengal ranked fourth in this category for two years in a row (2006-07, 2007-08), despite having a higher than 40% rate. West Bengal has occupied a rank between one and three from 2008-09 to 2020-21, with the state frequently occupying the second position among the general category states in India, so the trend of outstanding liabilities as a percentage of GSDP has been highly alarming over the years due to the states' relative position among each other.

Figure − 1

Table-2

Rank across the General category States
Year	GFD as a percentage of GSDP	Rank	RD as a percentage of GSDP	Rank	Outstanding Liabilities as a percentage of GSDP	Rank
2003-04	6.800222616	3	4.834657105	2	41.38519319	6
2004-05	5.104085972	4	3.944284277	1	42.88007325	6
2005-06	4.169472555	5	3.209625227	1	42.27758307	6
2006-07	4.367899083	2	3.183254537	1	43.72446589	4
2007-08	3.806563149	3	2.721358743	1	41.45581006	4
2008-09	3.96557924	4	4.301893114	1	39.89618371	3
2009-10	6.25500808	1	5.410143261	1	37.71406355	2
2010-11	4.236819878	1	3.746537598	1	38.07497475	2
2011-12	3.351215632	3	2.75800977	1	36.51604178	2
2012-13	3.173655862	4	2.289865552	3	35.4079681	2
2013-14	3.587516349	3	2.677050329	2	33.41677786	2
2014-15	3.808062721	2	2.38649738	3	36.06971385	2
2015-16	2.620218894	11	1.140725233	5	34.78239929	1
2016-17	2.909364789	11	1.843495475	5	35.02698707	1
2017-18	2.968196012	8	1.006155967	7	34.31723356	1
2018-19	3.037877532	6	0.943405855	7	33.6638671	2
2019-20	2.824586965	14	0.510919397	10	33.50955651	2
2020-21	2.419876571	15	0	9	34.26473895	3
Source: State Finances: A Study of Budgets, Chapter-IV, Reserve Bank of India, Mumbai and Author calculation

4.2 Fiscal Performance on the basis of individual Indicator Indices :

As per Table 3 and Graph − 2 reports, It has been noted that the State's fiscal performance in terms of managing the deficit was at its lowest in the year 2003–04.But in next five years i.e from 2004 to 2009, it has slightly better performed. Although in 2009-10 the performance has declined. The State has not continued to manage the effectively up to year 2018-19 with low performance because deficit Indicator value lies between 34 to 37 since 2018-19 .This is a pivotal issue for any state because if the deficit is high then it is quite a problem to manage the economic activities of that state.But in the following year, this value dropped dramatically to 23.71 And in the very next year, this value dropped again to 18.43 in 2020-21.

The own Revenue Effort Index (OREI) reveals that the year2005-06 was the best performance year over the time period 2003-04 to 2020-21 in terms of revenue collection by the state on its own effort. In the next year the performance has deteriorated but further in the next year 2006-07, performance become marginallywell. After that year the performance continuously deteriorated up to 2016-17 and the year 2016-17 was the worst performance year.Again,in next year the performance become slightlyimproved.Thereafter it has deteriorated up to 2020-21.

Expenditure and Debt Servicing Index (EXDEI) indicate that the worst performance year was 2003–2004 in respect of expenditure and debt servicing during the time period 2003–2004 to 2020-21.Then next two years i.e 2004-05 and 2005-06, it has become improve marginally. But in the next year, it has deteriorate .Again it has improved in the next two yearsi.e 2007-08 and 2008-09 ,, but in the year after that, it again deteriorated significantly. And in subsequent years its value gradually improved, resulting in a reduction in the index value of expenditure and debt servicing. The 2018-19 is the best performance year because the index value is least.

Table-3

Rank intra state of West Bengal
Year	Deficit Indicator Index(DII)	Rank	Own Revenue Effort Index (OREI)	Rank	Expenditure & Debt Servicing Index (EXDEI)	Rank
2003-04	36.806081	1	21.87104241	7	50.99472105	1
2004-05	36.089247	3	24.04112894	6	47.36933538	2
2005-06	35.726839	4	27.40891499	1	38.27073016	5
2006-07	35.05199	13	25.35434175	3	40.3820206	4
2007-08	35.274435	10	25.36684622	2	37.16441189	6
2008-09	35.408985	7	24.7829582	4	30.60315771	7
2009-10	36.408431	2	21.60132151	8	41.13798618	3
2010-11	35.564079	5	24.25636666	5	26.40108938	10
2011-12	35.081296	12	18.25956565	16	26.824498	9
2012-13	34.990668	14	19.10809708	14	26.08086126	11
2013-14	35.337423	8	18.04947286	18	28.09783107	8
2014-15	35.175271	11	19.912623	11	24.48964084	12
2015-16	35.540123	6	20.35679447	10	21.32832584	16
2016-17	34.419656	15	18.22197917	17	21.89060773	15
2017-18	34.297427	16	20.53942696	9	21.22118807	17
2018-19	35.287388	9	19.46150092	12	20.50848301	18
2019-20	23.713891	17	19.45066239	13	22.1546487	14
2020-21	18.431358	18	18.71417837	15	22.58456048	13
Source: State Finances: A Study of Budgets, Chapter-IV, Reserve Bank of India, Mumbai and Author calculation

From Table 4, it is observed that the rank of West Bengal in terms of Deficit Indicator Index (DII) performance among 17 general-category states of India has changed over the period of time. In this regard, the position of this state is very poor compared to other states except 2016–17, 2017–18, 2019–20, and 2020–21, and the year 2020–21 was the best performance year in terms of deficit because the DII value is the lowest. So it reveals the dynamic situation. But if we look at the Own Revenue Effort Index (OREI) side, we find that West Bengal's performance has remained unchanged relative to other states during the period 2003–04 to 2020–21. Rank ranges from 15 to 17 out of 17 states.Hence, West Bengal's performance in this respect is very poor. That is, West Bengal lags considerably behind other states in terms of revenue augmentation by the state on its own initiative. As a result, this performance reflects static performance rather than dynamic performance.

In terms of expenditures also, West Bengal ranks very poorly compared to other states and has almost always maintained the same trend, except in 2004-05, although performance is comparatively better with respect to the performance of the other states in this regard. So the relative position of West Bengal in terms of EXDEI performance is static, not dynamic.

Table-4

Rank across the general category States
Year	Deficit Indicator Index(DII)	Rank	Own Revenue Effort Index (OREI)	Rank	Expenditure & Debt Servicing Index (EXDEI)	Rank
2003-04	36.80608	7	21.87104	15	50.99472	3
2004-05	36.08925	6	24.04113	16	47.36934	12
2005-06	35.72684	3	27.40891	16	38.27073	1
2006-07	35.05199	4	25.35434	16	40.38202	2
2007-08	35.27444	7	25.36685	16	37.16441	1
2008-09	35.40898	5	24.78296	17	30.60316	2
2009-10	36.40843	3	21.60132	17	41.13799	1
2010-11	35.56408	4	24.25637	17	26.40109	3
2011-12	35.0813	5	18.25957	16	26.8245	2
2012-13	34.99067	7	19.1081	16	26.08086	2
2013-14	35.33742	5	18.04947	17	28.09783	1
2014-15	35.17527	6	19.91262	16	24.48964	2
2015-16	35.54012	4	20.35679	16	21.32833	3
2016-17	34.41966	14	18.22198	16	21.89061	3
2017-18	34.29743	12	20.53943	16	21.22119	3
2018-19	35.28739	6	19.4615	15	20.50848	4
2019-20	23.71389	13	19.45066	16	22.15465	4
2020-21	18.43136	17	18.71418	16	22.58456	4
Source: State Finances: A Study of Budgets, Chapter-IV, Reserve Bank of India, Mumbai and Author calculation

4.3 Fiscal performance on the basis of Composite Index :

Table 5

Status of Fiscal Performance of West Bengal among General Category states
Year	Deficit Indicator Index(DII)	Rank	Own Revenue Effort Index (OREI)	Rank	Expenditure & Debt Servicing Index (EXDEI)	Rank	Final Performance	Final Rank among States
2003-04	36.80608	7	21.87104	15	50.99472	3	45.63195503	16
2004-05	36.08925	6	24.04113	16	47.36934	12	48.49914775	14
2005-06	35.72684	3	27.40891	16	38.27073	1	30.86677093	17
2006-07	35.05199	4	25.35434	16	40.38202	2	51.36788327	15
2007-08	35.27444	7	25.36685	16	37.16441	1	32.33383721	17
2008-09	35.40898	5	24.78296	17	30.60316	2	24.12202216	17
2009-10	36.40843	3	21.60132	17	41.13799	1	8.220113469	17
2010-11	35.56408	4	24.25637	17	26.40109	3	29.6955198	17
2011-12	35.0813	5	18.25957	16	26.8245	2	23.9506427	16
2012-13	34.99067	7	19.1081	16	26.08086	2	24.70881631	16
2013-14	35.33742	5	18.04947	17	28.09783	1	12.77448726	17
2014-15	35.17527	6	19.91262	16	24.48964	2	27.14829043	15
2015-16	35.54012	4	20.35679	16	21.32833	3	41.10684988	14
2016-17	34.41966	14	18.22198	16	21.89061	3	48.9091	15
2017-18	34.29743	12	20.53943	16	21.22119	3	47.66774894	13
2018-19	35.28739	6	19.4615	15	20.50848	4	38.75880423	13
2019-20	23.71389	11	19.45066	16	22.15465	4	48.13584412	15
2020-21	18.43136	12	18.71418	16	22.58456	4	43.10468955	16
Source: State Finances: A Study of Budgets, Chapter-IV, Reserve Bank of India, Mumbai and Author calculation

From Table 5, Finally, West Bengal Fiscal Performance Index (WBFI) i.e the composite index stated that the best performance years are 2017-18 and 2018-19with respect to deficit control, own effort of revenue collection and expenditure and debt servicing managementBut it ranks 13th which is very poor compared to the general states of IndiaThat is, it can only be said that good is bad.Afterall,It is observed that the over all fiscal performance of West Bengal among the general category States in India is very worrying becauserank Position is always downward.In 2003-04, Fiscal performance rank is 16But in the following year, the position improved slightly and became 14.Again, the following yeari.e2005-06, the position further deteriorated to 17.The very next year the situation worsened slightly and the situation became 15.However, for the next five years(2007-08 to 2011-12), West Bengal's fiscal performance was the lowest among the general states.Again in the next two years the financial situation improved slightly and stood at 16.But the very next year the financial condition worsened and ranked 17th which is the lowest among the general statesin India.Then from 2014-15 to 2019-20 West Bengal's financial position improved slightly compared to the general states but again deteriorated in 2020–2021 and stood at sixteenth.

So the fiscal performance of West Bengal is worst compared to other general states in India as it is clear from this table because in most cases the fiscal performanceof West Bengal has been the lowest among the general states in different years though sometimes it has improved slightly only to deteriorate again in the very next year and in several years, there has been no change in the fiscal performance over the years.So the fiscal performanceof West Bengal has not changed in that sense over time so the fiscal performance of West Bengal is not dynamic .A dynamic situation is a situation where productivity changes or improves over time ,But there has been no significant change or improvement in the financial situation of West Bengal over time.Rather, it remains the lowest among the general states of West Bengal.

The fiscal performance of a state is very important issues Because the economic activity of the state is organized based on this performance. But from the above discussion it is clearly seen that the financial situation of West Bengal has not improved at all after implementation of FRBM Act and during the period of our discussion, West Bengal's financial status has always remained the lowest among the 17 general states of India at most of the time.The state could never revenue surplus. On the other hand, West Bengal ranks apex in terms of revenue deficit compared to other general states in India.This means that revenue expenditure in West Bengal is much higher than revenue earning in most cases.So the Deficit Indicator Index(DII)has never been satisfactory for West Bengal although it has improved somewhat since 2016-17 but it was a matter of concern in 2018-19 as this index stood at 6th rank.

West Bengal is also in a worst position compared to other general states in terms of own revenue collection Which never became satisfactory for the state. That is, compared to other general category states, the state has less potential for collection of revenue through direct taxes and indirect taxes and other sources. Due to low revenue collection, the financial situation of the state has naturally become very poor.So in this case the West Bengal government has to take appropriate steps on how to increase the revenue to a greater extent through which the standard of financial situation of West Bengal can be properly improved.Although in a federal structure like India where the Centre and the States collect revenue from different areas, over the years it has been seen that Finance Commissions have been set up at different times where there is a law on how much the Central Government can collect tax and how much the State Government can collect tax. It has been formulated.But it has been observed that the central government has more scope to collect taxes than the state governments in cases where the state governments have to increase the scope of imposition of taxes so that they can collect more taxes.Besides this, the West Bengal government also needs to increase its source of revenue.

Similarly, Its performance over the time in terms of expenditure and debt servicing is also unsatisfactory.Such a result reveals how significantly the state relies on federal aid to manage its earnings and spending. To achieve long-term economic sustainability, the state should work to increase its own revenue collection and execute effective expenditure management strategies and debt servicing plans.

The study is significant for two reasons: first, it is founded on a simple technique that capture the fiscal performance along various dimensions. Second, the macroeconomic stability and microeconomic efficiency of this study are important.There are 17 general category states in the enormous nation of India.Since there is a fiscal imbalance at both the centre and state levels, both the federal and state governments—regardless of whether they fall under a special category or a general category—should practise fiscal restraint. This can only be sustained if efforts are made to increase revenues, minimization of expenditures and take devastating decision regarding the debt servicing measures at both the federal and state levels.So the Government of West Bengal should enhance the efficiency tax collection through the implementation of proper policy and manage the debt management.

Even though the study only considers one general category state in India, it serves as a case study to develop ides for all other general category states in India. The study examines potential areas for additional research in the area of fiscal performance of other general category states and compares general category states to special category states to determine whether the general category states' performance is superior to that of the special category states' performance. Future research in this field is needed since it's crucial to thoroughly analyse each state's revenue and spending patterns in order to offer policy solutions.

Conflicts of Interest

The present study has no conflict of interest.

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Appendix Tables 1 and 2 are not available with this version

Competing interest reported. Conflicts of Interest The present study has no conflict of interest.

Fiscal performance of West Bengal as a General Category States in India : Is it dynamics ?

Status:

Version 1

Abstract

Figures

1. Introduction

2. Literature Review

3. Objective, Data Sources And Methodology

4. Fiscal Performance Of West Bengal

4.1 Fiscal Performance Indicators:

4.2 Fiscal Performance on the basis of individual Indicator Indices :

4.3 Fiscal performance on the basis of Composite Index :

5. Conclusion And Policy Implication

Declarations

References

Appendix Tables

Additional Declarations

Status:

Version 1