Amaravati, Nov 26 (PTI): The Andhra Pradesh government on Friday further amended the Fiscal Responsibility and Budget Management Act, 2005, to enable enhanced borrowings and also allow a larger revenue deficit.
On the final day of its delayed monsoon session, the state Legislature passed the FRBM Act Amendment Bill introduced by Finance Minister Buggana Rajendranath.
The fresh amendments to various clauses in the FRBM Act were brought in on a day the Comptroller and Auditor General of India came out with a report on the State Finances Audit Report, pointing out that the previous amendment in December 2020 was at “variance with the projections made by 14th Finance Commission for fiscal balance”.
The fresh amendment enacted on Friday enhances the “limit the amount of annual incremental risk weighted guarantees to 180 per cent of the total revenue receipts in the year preceding the current year” from the existing 90 per cent.
A new clause has been inserted in the FRBM Act prescribing higher limits of revenue deficit from 2021-22 to 2025-26 financial years.
For the current year, the revenue deficit limit has been pegged at 3.6 per cent of the Gross State Domestic Product, up from 2.5 per cent in 2019-20, though the actual that year was 3.17 per cent.
The revenue deficit limit has been pegged at 3.3 per cent (for 2022-23), three per cent (2023-24), 2.7 per cent (2024-25) and 2.4 per cent (2025-26).
Similarly, another new clause has been inserted, prescribing the fiscal deficit limits till 2025-26, including a 0.5 per cent additional borrowing allowed for performance in the power sector.
For 2021-22, the fiscal deficit limit has been set at five per cent of the GSDP.
The limit has been set at 4.5 per cent for 2022-23, four per cent for 2023-24 and 2024-25 and 3.5 per cent for 2025-26.
Also, the amendment brought in yet another new clause to “ensure the outstanding total liabilities”, excluding government guarantees” were contained with the prescribed limits till 2025-26 fiscal year.
For the current year, the limit has been set at 35.6 per cent of the GSDP. It will be 36.3 per cent in 2022-23, 36.1 per cent in 2023-24, 35.8 per cent in 2024-25 and 35.5 per cent in 2025-26.
Explaining the objects and reasons behind the amendments, the Finance Minister said the “damage inflicted by the state bifurcation had a disastrous impact on the economic and financial parameters”.
Buggana said the disadvantages arising from the uneven division of resources (between AP and Telangana) was likely to circumscribe the long-run growth prospects of the state.
The outbreak of COVID-19 and the unprecedented measures adopted to contain its spread also had a serious impact on the state’s resources, causing a substantial reduction in realisation of its own revenues.
“Horizontal devolution of Central transfers has considerably reduced in the 15th Finance Commission award. These added constraints only compounded the fiscal stress of the state,” the Finance Minister noted.
Hence the amendments to the FRBM Act, he added. PTI DBV APR APR
