Pattern of Public Expenditure and Expenditure Implications of Fiscal Reform Measures
4.2 Trend and Pattern of Total Expenditure of the State
Total expenditure of the state includes revenue expenditure, capital outlay and loans and advances provided by the state government for different activities. The trend and buoyancy of the total expenditure during the study period provides vital information about the growth of total expenditure with respect to overall growth of the economy. The ratio of total expenditure to GSDP has been computed to observe the relative growth of expenditure with respect to GSDP of the state. As done in the previous chapter, decade wise compound growth rate has been computed to have an idea about the relative growth of total expenditure in the two decades. The growth and buoyancy of total expenditure and ratio of total expenditure with respect to GSDP of the state during the study period has been provided in table 4.1.
Table 4.1
Pattern of Growth and Buoyancy of Total Expenditure of the State during 1990-91 to 2009-10 (``` in crore) `
Year Total
Expenditure
Annual Growth of Total Expenditure
Total Expenditure as a Percentage of GSDP
Buoyancy of Total Expenditure
1 2 3 4 5
1990-91 2350 - 17.77 -
1991-92 2678 13.96 18.16 1.10
1992-93 2828 5.59 17.41 0.50
1993-94 3305 16.89 18.04 1.18
1994-95 3679 11.30 17.32 0.72
1995-96 4036 9.72 17.18 0.86
1996-97 3938 -2.44 15.49 *
1997-98 4477 13.69 16.22 1.80
1998-99 4856 8.47 15.70 0.64
1999-00 6461 33.05 18.25 2.68
2000-01 7196 11.37 19.23 2.00
2001-02 7442 3.42 19.11 0.84
2002-03 7749 4.13 17.56 0.31
2003-04 9199 18.72 19.13 2.08
2004-05 13384 45.49 25.06 3.53
2005-06 11727 -12.38 19.75 *
2006-07 12990 10.77 20.08 1.21
2007-08 14575 12.20 20.51 1.24
2008-09 16705 14.61 20.57 1.02
2009-10 23960 43.43 25.91 3.14
CAGR
1990-91 to 1999-00 11.89 - - -
CAGR
2000-01 to2009-10 14.30 - - -
CAGR
1990-91 to 2009-10 13 - - -
Source: Handbook of Statistics on State Government Finances, Reserve Bank of India, various issues State Finances: A Study of Budgets, Reserve Bank of India, various issues
* Growth of total expenditure is negative in those years
It is clear from table 4.1 that total expenditure of the state government has increased from ` 2350 crore in 1990-91 to ` 23960 crore in the year 2009-10 and registering a compound annual growth rate of 13 percent during that period. This rate, however, is lesser than the compound growth rate of total expenditure of all states during the same period (14.01 percent
as per RBI, 2011). Similarly, the aggregate expenditure of the government has increased from ` 2689 crores in 1990-91 to ` 24968 crores in 2009-10 and thus registering a growth rate of 12.44 percent during that period. The average ratio of aggregate expenditure to GSDP of the state during the study period is found to be higher compared to the ratio in 1980s (RBI, 2011). The growth rate of total expenditure of the state in the second sub-period (2000-01 to 2009-10) is found to be much higher than the growth rate of total expenditure in the first sub- period under consideration. While the annual compound growth rate of total expenditure in 2000-01 to 2009-10 was 14.30 percent, the same was found to be 11.89 percent in the previous sub-period. Additionally, a wide fluctuation has been noticed in the annual growth rate of total expenditure during the study period. High and unusual increase in total expenditure of the state has been noticed in some years such as 1999-00, 2004-05, and 2009- 10. The significant increase in total expenditure in 1999-00 and 2009-10 was mainly due to implementation of the revised pay scale to the government employees. The significant increase in total expenditure in 2004-05 was due to increase in non-plan revenue expenditure by ` 1187 crore and capital expenditure under economic services by ` 1545 crore which were nearly 36 percent and 46 percent respectively of the net increase of total expenditure over the previous year (Government of Assam, 2005). The state also experienced negative growth of total expenditure in the year 1996-97 and 2005-06. Decline in revenue expenditure on economic services and grants-in-aid as well as decline in capital expenditure on general services contributed towards negative growth of total expenditure in the year 1996-97. The negative growth of total expenditure in the year 2005-06 was mainly due to decrease in non- plan capital expenditure by ` 1333 crore and less disbursement of loans by ` 869 crore over the previous year (Government of Assam, 2005). It is necessary to unearth the reasons for these fluctuations in total expenditure of the state. The classification of the total expenditure into different components provides the reasons for such wide fluctuation in total expenditure which is carried out in the next sub-sections. The average ratio of total expenditure to GSDP of the state during the period of study is found to be 20.53 percent which is higher than the ratio in 1980s (which was only 18.84 percent). The total expenditure-GSDP ratio of the state was found to be more or less stable during 1990s which ranged from 15.70 percent in 1998- 99 to 18.25 percent in 1999-00. After that, the ratio was found to increase and attained a high of 25.06 percent in 2004-05 which was followed by decline in the subsequent years. A
sudden increase in the ratio was observed in the year 2009-10 as total expenditure-GSDP ratio of the state jumped from 20.57 percent in 2008-09 to 25.91 percent in 2009-10. As discussed above, this was due to payment of revised pay scale to the government employees which led to sudden increase in total expenditure. During the first decade of the present century, the average ratio of total expenditure-GSDP of the state was found to be comparatively higher than the previous decade. The year wise buoyancy of total expenditure of the state has been found to be positive and more than one for most of the years implying that there was a significant increase in total expenditure with respect to growth of GSDP during the study period. The total expenditure-GSDP ratio of the state during the period of study has been provided in figure 4.1.
Figure 4.1 Ratio of Total Expenditure to GSDP of the State during the Study Period
It is evident from figure 4.1 that, during 1990s, the ratio was within the range of 15.70 percent in 1998-99 to 18.25 percent 1990-00. Increase in the ratio was noticed during the time period 2000-01 to 2009-10, particularly in the year 2004-05 and 2009-10. As increase in total expenditure has been observed during the period of study, it is necessary to unearth the reasons for such increase in expenditure during the period under study. The pattern of public expenditure over the years gives detail information regarding the nature and composition as well as reasons for increase in expenditure of the state.