TRENDS IN REVENUE AND EXPENDITURE OF THE GOVERNMENT OF GUJARAT

Abstract

The finances of the Government of Gujarat changed markedly between 2000-01 and 2015-16. The state began the period with a large revenue deficit, high borrowing and a heavy interest burden. It ended it with a revenue surplus in most years, a fiscal deficit kept within the ceiling set by its fiscal responsibility law and a falling debt-to-GSDP ratio. This paper examines the trends in revenue receipts and public expenditure over the period, using budget documents, reports of the Comptroller and Auditor General (CAG), Reserve Bank of India state finance studies and Finance Commission reports. It finds that the improvement rested on buoyant own tax revenue after the introduction of value added tax (VAT) in 2006, rising central transfers and restraint on revenue expenditure, while capital outlay and social spending grew unevenly. The paper concludes that consolidation was real but depended heavily on a small number of tax sources and left some priority sectors under-funded.