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Economic
Development Policy |
| STATE
FINANCES |
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EXPENDITURE
TRENDS
Developmental
expenditure constitutes about two–thirds of the total public
expenditure of the state of Madhya Pradesh. The non-developmental
component, however, has increased significantly in recent times, and is
a cause of concern. The sectoral break up shows that social services,
particularly education, have registered an increasing trend in the
overall scenario, reflecting the priorities of the present Government.
Agriculture, irrigation and power are the other major heads, comprising
the bulk of the expenditure under economic services. However one notices
that the shares of power, transport and roads and bridges, which are
crucial items for the economic development of a state, have fallen in
the last decade.
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Sectoral Spends
as % of GSDP
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1993-94
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1994-95
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1995-96
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1996-97
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1997-98
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1998-99
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Total
Expenditure
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16.83
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15.89
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16.08
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17.38
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17.55
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17.60
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Developmental
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11.46
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10.26
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10.44
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11.67
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11.34
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11.05
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Social
Services
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5.29
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5.41
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5.39
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5.64
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5.74
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6.38
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Education, Sports, Art and Culture etc.
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2.45
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2.43
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2.57
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2.59
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2.50
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2.88
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Health and Family Welfare
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0.79
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0.79
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0.73
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0.77
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0.76
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0.94
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Water Supply and Sanitation
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0.53
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0.56
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0.50
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0.51
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0.51
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0.53
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Housing
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0.07
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0.07
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0.07
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0.06
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0.06
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0.08
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Urban Development
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0.10
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0.10
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0.11
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0.13
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0.11
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0.11
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Economic
Services
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6.18
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4.85
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5.06
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6.02
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5.60
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4.66
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Agriculture and Allied Activities
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1.39
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1.29
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1.32
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1.36
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1.38
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1.48
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Irrigation and Flood Control
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1.12
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1.08
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0.96
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0.89
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0.86
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0.83
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Energy (Power projects)
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1.53
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0.57
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0.72
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1.82
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1.51
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0.59
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Industry and Minerals
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0.16
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0.15
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0.17
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0.14
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0.17
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0.11
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Transport
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0.65
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0.67
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0.63
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0.60
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0.57
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0.54
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Roads and Bridges
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0.61
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0.66
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0.62
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0.59
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0.57
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0.54
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Other transport
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0.04
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0.01
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0.01
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0.00
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0.00
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0.00
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Science, Technology and Environment
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0.00
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0.00
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0.01
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0.00
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0.00
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0.00
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General Economic Services
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0.06
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0.03
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0.03
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0.03
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0.04
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0.03
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Non-Developmental
(General Services)
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4.01
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4.26
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4.34
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4.47
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4.79
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5.28
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Of
which Interest Payments
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1.65
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1.87
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1.76
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1.83
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2.05
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2.02
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- to centre
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0.81
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0.84
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0.85
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0.85
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0.92
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1.01
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- to others
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0.83
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1.03
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0.91
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0.98
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1.13
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1.01
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Compensation
to Local Bodies
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0.31
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0.29
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0.40
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0.44
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0.41
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0.46
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(Source:
Finance & Account Statistics of MP for various years)
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The
comparative picture of Madhya Pradesh visa-vis expenditure for all
states combined is shown in the following
table.
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Comparison of
Expenditure (Average 1993-94 to 1998-99)
(as % of GDP)
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Madhya
Pradesh
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All
States
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Revenue
Expenditure
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14.47
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12.35
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Developmental
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9.58
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7.55
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-
Social Services
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5.41
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4.42
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-
Economic Services
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4.18
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3.15
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Non-Developmental
(General
Services)
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4.50
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4.62
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- Interest Payments
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1.86
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1.88
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Compensation
to Local Bodies
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0.38
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0.13
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Capital
Expenditure*
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1.42
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1.87
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Developmental
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1.46
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1.42
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-
Social Services
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0.24
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0.23
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-
Economic Services
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1.22
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1.18
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Non-Developmental
(General Services)
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0.02
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0.07
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Loans
& Advances (net)
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-0.05
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0.42
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*
calculated as capital outlay (developmental + non-developmental) plus
net lending
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(Source:
Finance & Account Statistics of MP for various years, India
- Policies to Reduce Poverty and Accelerate Sustainable Dev., The World
Bank 2000))
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Salaries and Wages
Public
Administration is the most significant item of expenditure by the state
from its own sources. Salaries and pensions generally accounted for
almost half the revenue receipts of Madhya Pradesh. However, the revenue
expenditure has increased remarkably by more than 21% in one year
(1997-98 to 1998-99), post the implementation of Fifth Pay Commission
recommendations. The growth of payments towards pensions has been more
than 36% in the same year. The White Paper published by the Government
in 1999 acknowledges that this increase in payment of salaries and
pensions for the year 1998-99 has resulted in a fiscal imbalance.
Since
more than three fourths of the total revenue receipts are being spent
only on debt repayments and administrative setup costs, the state is
left with no other alternative but to resort to debt financing, both for
social welfare and development programmes as well as other
administrative expenditures.
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Expenditure
on Salaries, Pensions and Interest Payment
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(as
% of Revenue Receipts)
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Year
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Pension,
Wages and Salaries, including grants to Edu. Institutions. &
Local Bodies for salaries
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Interest
payment
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Minimum
Compulsory Expenditure
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1990-91
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53.82%
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11.28%
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65.11%
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1995-96
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55.40%
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13.38%
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68.79%
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1998-99
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63.87%
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15.09%
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78.96%
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(Source:
White Paper on Economic and Financial Status in Madhya Pradesh, Feb.
1999)
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The
above situation has had a direct impact on the Debt Management of the
state. Each year, the repayments for earlier loans contributed a major
share in the new loans and advances undertaken by the state, consuming
part of the borrowed funds available for developmental purposes. The
increase in interest rates has aggravated the situation further, though
in comparison to many other states, Madhya Pradesh appears to be in a
favourable position.
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Interest payments
as % of Revenue receipts for selected states
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State
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Interest
payments as % of Revenue receipts
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Avg.
(1990-95)
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Avg.
(1995-99)
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Andhra
Pradesh
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12.1
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16.9
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Gujarat
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15.4
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17.3
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Karnataka
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11.4
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13.6
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Madhya
Pradesh
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12.1
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14.9
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Maharashtra
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11.5
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15.1
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Rajasthan
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15.2
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22.8
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Tamil
Nadu
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10.1
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7.9
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Uttar
Pradesh
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18.2
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21.8
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Source:
State Finances: A Study of Budgets of 2000-2001, RBI, Dec. 2000)
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The
White Paper estimates that, if corrective measures are not undertaken
immediately, the interest on loans would possibly increase to 21% of the
revenue receipts and total repayable loan would increase to 30 % of the
NSDP by 2002-03.
State Level Public Enterprises
Madhya
Pradesh had 32 Government companies, including 10 subsidiaries, and 4
statutory corporations (CAG Report (Commercial ), GoMP for the year ended 31st
March, 1999)
should be a super script namely the Madhya
Pradesh Electricity Board (MPEB), Madhya Pradesh State Road Transport
Corporation (MPSRTC), Madhya Pradesh Finance Corporation (MPFC) and
Madhya Pradesh State Warehousing Corporation (MPSWC) in 1999. Of these,
12 companies and one corporation (MPSRTC) had incurred an aggregate loss
of Rs. 37.89 Cr. and Rs.66.37 Cr., while the remaining 19 companies and
3 corporations had earned an aggregate profit of Rs.11.80 Cr. and
Rs.126.42 Cr., respectively. 14 out of the 19 companies had earned
profits for two or more successive years.
Many
of the organisations are in fact on life support systems, through
continual budgetary support from the Government in the form of
subsidies, guarantees, waiver of dues, and conversion of loans into
equity.
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Budgetary Outgo
towards Public Enterprises (Rs. Cr.)
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1996-97
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1997-98
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1998-99
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Companies
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Corpns.
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Companies
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Corpns.
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Companies
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Corpns.
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Equity
capital
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10.07
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16.00
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3.57
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703.00
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3.80
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1.80
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Loans
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18.36
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206.65
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29.71
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323.39
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11.33
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218.40
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Grants
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26.30
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10.81
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7.99
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7.44
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7.19
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9.24
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Subsidy
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9.88
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1082.41
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10.51
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261.36
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2.88
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306.87
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Total
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64.61
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1315.87
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51.78
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1295.19
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25.2
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536.31
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Source:
CAG Report - Commercial, 1999
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As
per the CAG Report, the returns on total capital employed in 32
companies have reduced from a meagre 4.05% in 1997-98 to just 0.58% in
1998-99. The returns in
case of Corporations showed a comparatively healthier trend of 7.77% in
1997-98 and 8.71% in 1998-99.
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