Sample these official budget figures of the West Bengal government for 2022-2023. The state’s total outstanding debt stands at a staggering estimated amount of Rs 5,86,438 crore for the current fiscal. The estimated loan repayment figure for the same period is a whopping Rs 69,511 crore. While the state’s budgeted revenue receipts for the current financial year are estimated at Rs 1,98,067 crore, it is expected to receive around Rs 59,916 crore as grants and loans for the same period.
While many apprehend these figures to be indicators of the dire financial crisis that Bengal has plummeted to, others believe it to be the real disease behind overt social symptoms like corruption. BJP leader, economist, and former chief economic advisor to the Indian government Dr Ashok Lahiri happens to believe in both. Edited excerpts from an exclusive interview with News18:
How do you read the financial status of the Bengal government?
Bengal has been moving towards this situation for a long time. A year ago, I called this a financial crisis. RBI experts, while doing risk analysis for states, call Bengal “financially stressed”, which is when your debt is too high relative to your income and your interest payments come as a very high proportion of your revenue receipts. It becomes even more problematic when your committed expenditure, the amount that you have to spend because of your contractual obligations like salaries, pensions and interest payments, also becomes too high. I don’t blame a government which must be in tune with people and announces new schemes. But when you announce new schemes without the money, then that becomes a problem. That’s what has happened with this government.
How much interest is this government paying for its loans and what is the percentage vis-a-vis its total revenue receipt?
The state paid Rs 33,782 crore as interest for its loans last year, which is about 17 per cent of its revenue receipts. That’s a high number. If you compare the debt as a proportion of revenue receipts, that figure is about 3.25 times. That’s also very high. The repayment obligation is not only on you but on your future generations as well. And since interest payment is committed expenditure, more and more part of income will have to be committed in future.
For the 2020-21 fiscal, for which the latest CAG audited figures are available, Bengal’s committed expenditure was Rs 1,11,835 crore. This is about 60 per cent of the state’s total revenue receipts that year. Mind you, I haven’t taken into account other primary obligations of the state like building civic, health, and education infrastructure. The situation has come to such a pass that when chief minister Mamata Banerjee was asked for money to buy buses in Digha, she snapped back stating she has already given money for Lakshmir Bhandar and she can’t give more money and the department has to arrange for itself. The panchayat elections are coming and road conditions in the Bengal countryside are bad. The government has no money to build and repair roads. I feel bad for ministers who say in the assembly that they would “examine” infrastructure building proposals because they have no money.
So where do you see things going from here?
There is no example in world history where a state economy has done well and the government has gone bankrupt. But this government seems to be on a roller coaster of announcing new schemes. We never know when one starts and when one ends. Beautiful names given…We don’t know which one is a centrally sponsored scheme and which one is the state’s own… We come to know only when the state complains that the Centre has stopped giving money and so we cannot run it.
Is that one of the reasons why Mamata Banerjee is so vocal about alleging that Centre has stopped giving money because she doesn’t have money in state coffers to sustain her schemes?
Certainly. It’s very embarrassing when you make a commitment and then you cannot pay. Payment arrears is a common symptom of fiscal crisis. Another disturbing thing is West Bengal’s annual per capita income. In 2020-21, for which CSO numbers are available, per capita income of West Bengal was Rs 1,21,267. Believe it or not, it is less than the average all-India per capita income. So if you are less than average, then you must be much less than the well-performing states. Among the bigger states, Andhra Pradesh, Gujarat, Haryana, Himachal Pradesh, Karnataka, Kerala, Maharashtra, Punjab, Telangana, and Uttarakhand were all ahead. You can make a race to the bottom. But I am not comparing Bengal with the lowest of the low. I am comparing it with the best. And it doesn’t fare well at all.
What is the inevitable political fallout of this?
We have seen this for a long time: the tendency to blame the Centre for the state’s woes. That first reaction has already started. And they are not saying why. Firstly, there was the question of name changes (of schemes). Secondly, there’s the question of providing utilisation certificates and audits. There’s also the issue of failure to pay on time coupled with the great eagerness to borrow more and more.
Could that lead to the state getting into a debt trap?
Fortunately, there is the FRBM Act and according to section 3 of Article 293, a state, as long as it is indebted to the Centre, cannot borrow without the central government’s permission.
So a Sri Lanka-like situation will not happen here is what you are saying?
Yes, that won’t happen because it’s constitutionally protected and because before it becomes bankrupt, people will stop lending to it.
So what happens to Bengal? What happens to this government?
I am an optimist. I believe in constructive opposition. I have been telling this government that you are getting into a fiscal crisis. Am I against welfare payments? No, but there must be some balance. Here there is no will to cut the coat according to the length of the cloth. So much fanfare in announcing this scheme and that. Look at Uttarbanga and Pashchimanchal Unnayan boards. Look at their budgetary outlays, good numbers. Revised estimates, less. Final outcome, much less. So that’s the coat.
But leaders will always have political compulsion to do that…
Political leaders will always have a tendency to announce grand schemes because you get public acclaim when you announce them. But there’s also the question of credibility. One of the reasons for West Bengal’s lack of development is lack of capital outlay. The government is not spending enough on roads, bridges, health, education, and those lay the foundation of development. Bengal is lagging and because there is no employment and no honest way of earning money and so there’s corruption.
This sudden explosion of corruption…Why did this become such a potent issue in Bengal at this point in time? Has it got anything to do with the state’s economy?
Of course, it has. See, I am a very proud Bengali. And, like me, Bengalis take pride in their uprightness. To see mountains of cash popping out is very disturbing, insulting, and humiliating to them. I have done some introspection. Are we genetically inclined to be more corrupt? Is there anything inherently wrong with Bengalis? No. Compared to other Indians, we are at least as good as them, if not better. So why has this happened? This has happened because the moral decay came from economic decay…When people lose faith about getting jobs, earning an honest livelihood and making money. It’s a symptom that the people, including their leaders, have given up on honest ways of making money. And that actually is the reflection of the relative economic decay compared to some of the better-performing states of this country.
Do you believe this government can rectify that systemic flaw? Or will this government go?
I don’t want to make a political statement and pass judgement on this government’s political future. I hope that it will mend its ways and stop this pomp and show of announcing new schemes and promising people when they know they cannot pay and instead increase outlay on capital. Otherwise, whatever goes up comes down. Whether that will happen with or without a political change is for you to judge and for the voters to decide.