AUTHORS

Aniket Modak (1611022)

Aniruddha Bera (1611024)
Joydeep Naskar (1611057)

ECONOMICS Manabputra (1611065)

ABSTRACT
ASSIGNMENT This report is a part of course H101 graded
assignment submitted by the above authors.
The report consist of an elementary analyses of
some economic factors such as revenue receipt,
AN ELEMENTARY ANALYSIS OF capital receipt, revenue expenditure, revenue
deficit, fiscal deficit etc. and their trends over the
SOME ECONOMIC FACTORS OF years 20 06-2016.

WEST BENGAL

National Institute of Science Education and Research, Bhubaneswar

 AN ELEMENTARY ANALYSIS OF
SOME ECONOMIC FACTORS OF
WEST BENGAL

Introduction

West Bengal is fast emerging as one of the faster growing state economies of the country. The
state has registered healthy growth to the tune of 10.57% in 2015-16, higher than the 10.48%
growth of the previous year and the national average growth of 7.9%. West Bengal has been
registering an average growth of over 7.28% since 2004-05, closer to the 8% national growth
rate during the same period. Nevertheless, the state’s per capita gross state domestic product
(GSDP) continues to be lower than that of the country as a whole. West Bengal’s per capita
income (current prices) was seen to be Rs. 78,903 in FY15, lower than the Rs. 86,879 of the
country.

West Bengal is the 5th largest state economy of the country with a GSDP of Rs. 8,008,68
crores as of 2014-15 (constant prices) and contributes nearly 6.75% to the economy of the
nation. In terms of land area, the state covers 88,75,000 sq.km, making it the 13th largest
state in India in terms of area.
West Bengal’s economy is services driven, with nearly 65% of the state’s economy being
accounted for by the services sector. Agriculture accounts for 13% and industry 19% of the
state’s economy.

This note here takes a close look chiefly at the economic performance of West Bengal in
recent years and analyzes the state’s budget for 2015-16 along with its budget management
practices.

State’s Economy

The state has been recording strong growth rates in recent years. West Bengal grew at a
CAGR of 7.4% during FY06 to FY13, with growth touching a peak of 10.57% in FY15.
The share of agriculture and industry in West Bengal’s economy has been seeing a
progressive decline since 2009-10. Agriculture’s contribution to the GSDP (at constant
prices) has fallen from 15.6% in 2009-10 to 12.9% in 2012-13, while the share of industry
has declined to 18.7% from 20% in the same period. The share of industry in GSDP is
amongst the lowest for West Bengal and agriculture is the chief occupation of a large section
of the population. The decline in agriculture and industry is seen to be accounted for by the
increase in the share of the service sector that has grown from 60% to 65% of GSDP during
the last 4 years.
In terms of sectoral growth in FY15, industry recorded the highest jump in growth to 6.2%
from 2.9% in the previous year. On the other hand both, agriculture and services recorded
only marginal increase in growth rates. Agriculture grew by 2.6% from 1.6% in FY14, while
the service sector saw a growth of 9.5% in FY13 from 9.1% in the previous fiscal.
A look at the sector wise growth trend for a longer time frame i.e. 2005-06 to 2015-16, shows
that:
1. Growth in case of agriculture has fluctuated between -3.5% to 8.3%. On the whole,
the sector has grown at compounded annualised growth rate (CAGR) of 2.2% during
the last 8 years.
2. In case of industry, average growth has been 5.5% during the period. Growth has
fluctuated between -1.7% to 9.7% and the CAGR for the 8 year period for the sector
has been 5.7%.
3. The service sector has been registering robust growth close to 10% on an average in
the above mentioned period. The CAGR for this sector too has been close to 10%.

State Finance: Budget 2015-16

The state budget which is the annual financial statement of the government gives an account
of revenue and expenditure of the government.
In terms of the state’s fiscal health, West Bengal has a historical high debt burden, which
weighs on the state finances. The state’s finances are mainly used for servicing its high debt
burden (over Rs. 2 lakh crs), leaving lesser amounts for investments. The interest burden as a
part of its revenue receipts is amongst the highest for West Bengal. The state budget which is
the annual financial statement of the government gives an account of revenue and
expenditure of the government.

WBFRBM Act 2010 & WBFRBM Rules 2011

The West Bengal Fiscal Responsibility and Budget Management Act, 2010 And The West
Bengal Fiscal Responsibility and Budget Management Rules, 2011 aims to provide for the
responsibility of the State Government to ensure prudence in fiscal management and fiscal
stability by progressive elimination of revenue deficit, reduction in fiscal deficit and prudent
debt management consistent with fiscal sustainability, greater transparency in fiscal
operations of the State Government and conduct of fiscal policy in a medium-term
framework and for matters connected therewith or incidental thereto.

Finances of the State Government

Fiscal position of the State: Revenue receipts of the Government grew at a rate of 6.71 per
cent over the previous year, while the corresponding growth of revenue expenditure was
11.80 per cent. During the year, revenue receipts were Rs. 72882 crore as against revenue
expenditure of Z 91797 crore resulting in revenue deficit of Z 18915 crore. The revenue
deficit was 2.70 per cent of GSDP as against the FRBM Act target of 0.50 per cent. The fiscal
deficit during 2013-14 stood at Z 25347 crore which was 3.62 per cent of GSDP as against
the FRBM Act target of 3.00 per cent.

Enactment of Fiscal Responsibility Legislation

The State introduced the West Bengal Fiscal Responsibility and Budget Management
(WBFRBM) Act in July 2010 and amended it in February 2011 fixing the rolling fiscal
targets for 2010-15. The Act aimed at bringing in direction and prudence in fiscal
management and improving fiscal stability by progressive elimination of revenue deficit,
reduction in fiscal deficit accompanied by prudent debt management consistent with fiscal
sustainability and greater transparency. The third Medium-term fiscal policy statement and
Fiscal policy strategy statement was presented before the Legislature along with the Budget
for the year 2014-15 in February 2014. Though
The fiscal deficit was above the ceiling prescribed in FRBM Act, the State had brought down
the total liabilities closer to the ceiling prescribed in FRBM Act.

Prioritisation of Capital expenditure

Capital expenditure as well as expenditure under economic sector is the major indicator of
development activity. In both the cases, not only was the actual expenditure below budget
estimate, capital expenditure was low at 6.97 per cent of total expenditure during 2013-14.
This was indicative of failure on the part of the State in utilising its high cost borrowed funds
to create capital assets for accelerating development, as most of these funds were utilised to
meet the revenue deficit.

Review of Government investment

The Government is getting negligible return from its investments in irrigation works. Return
on investment in statutory corporations, rural banks, etc. also depicted a grim picture and was
less than one per cent.

Financial management and budgetary control

Against a total budget provision Rs. 154390 crore during 2013-14, expenditure of Rs. 134635
crore was incurred. This resulted in overall saving of Rs. 19755 crore. Expenditure of 8553
crore was incurred in 62 cases without any provision in the original estimates/supplementary
demand. There were instances of inadequate provision of funds, unnecessary/excessive re-
appropriations and rush of expenditure at the end of the year. In some cases, the anticipated
savings were not surrendered leaving no scope for utilising these funds for other
developmental purposes. In violation of the provisions of Budget Manual and West Bengal
Financial Rules, the Controlling Officers of test checked departments did not monitor the
progress of expenditure.

Financial Reporting
Delays were noticed in submission of annual accounts of autonomous bodies/ authorities as
also in the placement of Separate Audit Reports of some of the bodies in the Legislative
Assembly. There were also delays in finalising proforma accounts of departmentally managed
commercial undertakings indicating laxity in the accountability mechanism in respect of
public funds invested in those undertakings. Accumulation of unadjusted AC bills and
parking of developmental funds in Personal Deposit (PD) Accounts were major areas of
concern, as amounts were drawn from treasury or transferred out of the Consolidated Fund of
the State without proper treasury checks.

REVENUE RECEIPTS
REVENUE RECEIPT OF WEST BENGAL (2006-09)
REVENUE RECEIPT OF WEST BENGAL (2009-2011)
REVENUE RECEIPT OF WEST BENGAL (2011-13)
REVENUE RECEIPT OF WEST BENGAL (2013-2016)
CAPITAL RECEIPTS
CAPITAL RECEIPT OF WEST BENGAL (2006-09)
CAPITAL RECEIPT OF WEST BENGAL (2009-12)
CAPITAL RECEIPT OF WEST BENGAL (2012-2014)
CAPITAL RECEIPTS OF WEST BENGAL (2014-16)
YEAR TO YEAR TRENDS
REVENUE EXPENDITURE

REVENUE EXPENDITURE(crores Rs)

120000 106830
100000 91800
82110
80000 73330
64540
58500
60000 51613
Crore Rupees

38314
40000 31117 34161
20000 11310
0
6 7 8 9 0 1 2 3 4 5 6
-0 -0 -0 -0 -1 -1 -1 -1 -1 -1 -1
005 006 007 008 009 010 011 012 013 014 015
2 2 2 2 2 2 2 2 2 2 2

Fiscal Year

The revenue expenditure of the West Bengal State Govt. has been increasing with every
passing year. From Rs 31117 crores revenue expenditure in 2005-06, it soared high to Rs.
106830 crores in the fiscal year 2014-15, almost 3 times increase in 9 years. The estimated
revenue expenditure for the fiscal year 2015-16 is however low.

REVENUE RECEIPT

REVENUE RECEIPT(crores Rs)

120000
100000
80000
Croe Rupees

60000
40000
20000
2372625828301673690436920472605876068300728809647011310
0
06 07 08 09 10 11 12 13 14 15 16
05- 06- 07- 08- 09- 10- 11- 12- 13- 14- 15-
20 20 20 20 20 20 20 20 20 20 20

Fiscal Year

The revenue receipt of the West Bengal State Govt. has been increasing with every passing
year. From Rs 23726 crores revenue expenditure in 2005-06, it soared high to Rs. 96470
crores in the fiscal year 2014-15, almost 4 times increase in 9 years. The estimated revenue
receipt for the fiscal year 2015-16 is however low.
TAX REVENUE
 TAX REVENUE (crores RS)
59011

43520 41660 44456

37080
Crore rupees

28550
23855 25741
20200
17057
6672

6 7 8 9 0 1 2 3 4 5 6
-0 -0 -0 -0 -1 -1 -1 -1 -1 -1 -1
5 6 7 8 9 0 1 2 3 4 5
00 00 0 0 00 01 01 01 1 1 01
2 2 20 20 2 2 2 2 20 20 2
fis ca l year

The tax revenue of the West Bengal State Govt. has been increasing with every passing year.
From Rs 17057 crores tax in 2005-06, it soared high to Rs. 59011 crores in the fiscal year
2014-15. There’s tax receipt declined to Rs. 41660 crores in the year 2012-13 compared to
its previous year’s tax receipt of Rs 43520 crores, however, in the next fiscal year it increased
to Rs 44456 crores. The estimated tax revenue for the fiscal year 2015-16 is however low.

NON TAX REVENUE

NON-TAX REVENUE (Crores Rs)

18000
16000
14000
12000
10000
Crores Rupees

8000
6000
4000
2000
7688 6877 7785 161291081012560 3308 3584 5028 6752 961
0
6 7 8 9 0 1 2 3 4 5 6
-0 -0 -0 -0 -1 -1 -1 -1 -1 -1 -1
005 006 007 008 009 010 011 012 013 014 015
2 2 2 2 2 2 2 2 2 2 2

Fiscal Year

The non-tax revenue shows a very uneven and irregular pattern over the last 10 fiscal years.
Broadly it was increasing till fiscal year 2008-09. However, the non-tax revenue for the fiscal
years 2009-10 and 2010-11 was not too far from the peak. We see a large decline of non-tax
revenue from the year 2010-11 onwards which is slowly increasing and reached Rs. 6752
crores in fiscal year 2014-15.
REVENUE DEFICIT

REVENUE DEFICIT (crores Rs)

25000
21580
20000 18920
17270
14709 14570 13820
15000

10360
Crore Rupees

10000 8147

5000

0
0
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

-5000

-7391
-10000 -8333
Fiscal Year

The revenue deficit shows a very uneven and irregular pattern over the last 10 fiscal years.
In fiscal years 2005-06 and 2006-07, there was revenue surplus of Rs. 7391 crores and Rs.
8333 crores respectively. During the fiscal years 2007-08, 2008-09, 2009-10, the deficit
increased with a peak of Rs. 21580 crores in the fiscal year 2009-10. After that for two years
revenue deficit was large but it was less than the previous however, and surprisingly in the
fiscal year 2013-14, an increase in revenue deficit is observed, followed by a decrease in the
fiscal year 2014-15 as shown in the figure.

FISCAL DEFICIT
 FISCAL DEFICIT (Crore Rs)
30,000

24950 25350
25,000 23880

19530 19150
20,000
17700
Croer Rupees

15,000 13558
11431 11400
10,000

5,000

0
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Fiscal Year

The fiscal deficit shows a very uneven and irregular pattern over the last 9 fiscal years.
It has stable in the fiscal years 2006-07, 2007-08, then it increased to Rs 24950 crores in
2009-10. Next we see a decreasing patter for two years and it increased to a maximum of Rs.
25350 crores in the year 2013-14, followed by a small decrease in the next fiscal year.

COMPARISON OF FISCAL DEFICIT, PRIMARY DEFICIT AND

INTEREST PAYMENT
 Chart Title
30000

25000

20000

15000
Crore Rupees

10000

5000

0
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

-5000

-10000

Fiscal Year

FISCAL DEFICIT INTEREST PAYMENT PRIMARY DEFICIT

As expected the primary deficit makes up the most share of fiscal deficit. Interest payments
are generally less. However, in the fiscal year 2009-10, the interest payment was almost as
much as the primary deficit.

ANNUAL GROWTH RATE OF REVENUE RECEIPT

Year Growth %
2006-07 8.86%
2007-08 21.41%
2008-09 15.01%
2009-10 2.37%
2010-11 35.74%
2011-12 18.01%
2012-13 29.76%
2013-14 -5.03%
2014-15 32.36%
2015-16 17.24%

Annual Growth in Revenue Receipt

40.00%

35.00%

30.00%

25.00%

20.00%
Percentage

15.00%

10.00%

5.00%

0.00%
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
-5.00%

-10.00%

Fiscal Year

The growth percentage in Revenue Receipt shows an irregular trend with the highest growth
of 35.74% in the fiscal year 2010-11. The growth was negative during the year 2013-14. In all
other fiscal years we’ve witnessed positive growth.

CAPITAL RECEIPTS FROM CENTRE

 Capital Receipts Received from Centre
1800000 1680759
1578087
1600000
1400000 1307203
1200000
MILLION RUPEES

1000000
800000
600000
400000 301623.5 296551 302929.3
243694.5 244447.1
200000 62097 56246 56863 2998.3 3713.9 7183.7 14893.3 13973.7
0
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
Fiscal Year

Grants from Centre Tota l Ca pi ta l Recei pts

Share of Receipt from Centre

6

5.02
5 4.75 4.61

4
3.56
3.38
Percentage

2.94
3

2
1.52
0.99
1

0
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Fiscal Year

The actual capital receipt from the Centre has been more or less the same during these
years under study. However, the percentage of capital receipt from centre with respect to
the total capital receipt show some irregularities in the trend. The minimum is observed
during the fiscal year 2009-10, while the maximum is observed during the fiscal year 2012-
13.
The data for the fiscal years 2014-15 and 2015-16 are not currently available, as a result,
they are omitted from the analysis.
 LLakhs Rupees

3111681
980003
463495
1634771

3416123
1137998
450391
1790128

3949821
1403252
584086
1918667

TREND OF EXPENDITURE
5161333
1638481
1402545

total
2077543

5849987
2399596
774187

s oci a l
2635676

6453819
2734311
809049
2868042

Fi s cal yea r
economi c
7332637
3156377
896912
3228897

genera l
8211088
REVENUE EXPENDITURE
3421154
1204297
3532509

9179727
3826185
1208340
4083388

10682798
4115377
2184112
4286751

11310022
4579203
1984703
4672177

2 0 0 5 -0 6 2 0 0 6 -0 7 2 0 0 7 -0 8 2 0 0 8 -0 9 2 0 0 9 -1 0 2 0 1 0 -1 1 2 0 1 1 -1 2 2 0 1 2 -1 3 2 0 1 3 -1 4 2 0 1 4 -1 5 2 0 1 5 -1 6
 Percentage Share in Revenue Expenditure
60

50

40
PeRCENTAGE

30

20

10

0
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Fiscal Year

s oci a l % economi c % general %

The revenue expenditure has been increasing each year. The trend of share in revenue
expenditure shows that during the decade 2005-2016, more than 40% share goes to general
expenditure, followed by social expenditure and least share is towards economic
expenditure.
In the fiscal year 2008-09, we observe the highest share of economic expenditure. In the
recent years, we’ve seen a decrease in the same. It thus indicates poor economic activity in
the state.

In the latest fiscal year 2015-16, the total expenditure soared a high value of Rs 1131002
lakhs, with 41.48% devoted to general expenditure and 40.31% devoted to social
expenditure.

CONCLUSIONS

The State failed to achieve the FRBMA targets of revenue deficit and fiscal deficit during
2013-14. The increase in Revenue receipt in the current year was less than the increase in
revenue expenditure resulting in increase in the revenue deficit by 37 per cent over the
previous year. Fiscal deficit too increased by 32 per cent over the previous year. The
committed expenditure, which mainly consisted of payment of salaries and wages, pensions
and interest, constituted around 71 per cent of the Revenue expenditure leaving little
flexibility for reduction of the revenue expenditure. As far as capital expenditure is
concerned, though there was an increase of 52 per cent in the capital outlay in the current
year, its ratio to Aggregate expenditure of the State was only 6.97 per cent against the all
India General category's State average of 13.62.
Ratio of outstanding debt of the Government to GSDP has reduced from 36.93 per cent in
2012-13 to 35.99 per cent in 2013-14.

REFERENCES

1. Reserve Bank of India

https://www.rbi.org.in/
2. Finance Department, Govt. of West Bengal
http://www.wbfin.nic.in/default.aspx