Indian Express Editorial Summary : Analyzing State Budgets in India

GS-3 Mains : Budget

Short Notes or Revision Notes 

Question : Critically analyze the trends in central tax devolution over the past few years and the impact of unpredictable timing of additional central devolution on state borrowing plans

Scrutinizing State Finances

  • National elections raise focus on India’s fiscal health, but state finances often escape scrutiny.
  • State budgets and data from CAG (auditor) provide insights.
  • RBI data on advances and borrowings also helps assess state finances.

Analyzing State Budgets (2024-25):

  • Budgets/votes on account available for 26 states (except Arunachal Pradesh & Sikkim).
  • Combined state revenue receipts expected to grow 9.2% this year.
  • Growth depends on accuracy of revenue estimates from previous year (2023-24).
  • Half of state revenue comes from State’s Own Tax Revenue (SOTR).

Challenges in Revenue Growth Projections:

  • SOTR growth projected at 13.8% in FY2025 budgets, following 15.4% estimate in FY2024 revised estimates.
  • However, April-Feb 2023-24 data shows key components of SOTR (sales tax, GST, excise duty) growing slower than projected.
  • Achieving FY2025 budget targets might require significantly higher growth if actual 2023-24 revenue falls short.

Central Government Transfers

  • 40-45% of state revenue comes from central government transfers (taxes & grants).
  • Central tax devolution projected to increase 10.4% this year, matching the interim Union budget.
  • States received higher-than-budgeted tax devolution for 3 consecutive years (FY2022-24).
  • Unpredictable timing of additional central devolution may affect state borrowing plans.
  • Grant funding:
    • High 18% growth projected in revised estimates for FY2024.
    • 7% contraction budgeted for FY2025.

State Expenditures

  • States project 7% and 11% growth in revenue and capital expenditures, respectively.
  • Capital expenditure:
    • Impressive 27% growth in April-Feb 2023-24 (CAG data).
    • Revised estimates projected sharper 34% growth (unlikely to be achieved).
    • Double-digit growth needed in FY2025 to meet targets.
    • Slow start expected due to elections and final Union Budget delay.
    • Monsoon season may further delay spending.
    • Back-loaded spending pattern likely, impacting state borrowing throughout the year.

State Borrowings

  • FY2024 borrowing higher than expected:
    • Q4: Initial borrowing estimate of Rs 4.1 trillion.
    • Actual borrowing in March 2024: Rs 1.9 trillion (51% higher than estimate).
    • Possible reasons:
      • Holding larger cash reserves before elections.
      • Using up more borrowing limit before year-end.
    • FY2025 borrowing projections:
      • Lower borrowing in first two auctions compared to estimates.
      • Gross borrowing expected to be Rs 10.5-11 trillion.
      • Inclusion in bond index may ease government bond market pressure.
      • Potential for lower borrowing costs due to anticipated rate cuts in the second half of the year.

Conclusion:

Capital spending by states is likely to be slow in the first half of FY2025 due to elections. Spending is expected to pick up after the presentation of the final Union Budget and the monsoon season.

 

 

Indian Express Editorial Summary : Andaman and Nicobar Islands- India’s Strategic Sentinel in the East

GS-3 Mains : Security

Short Notes or Revision Notes 

Question : Critically analyze the factors that have influenced India’s evolving strategy towards the Andaman and Nicobar Islands, including historical precedents and contemporary security challenges.

Transforming the Andamans

  • A recent report reveals India’s plan to make the Andaman and Nicobar Islands a strategic security pillar in the Indo-Pacific.
  • This involves:
    • Expanding military infrastructure for advanced platforms.
    • Improving communication and surveillance networks.
    • Permanent troop deployment.

Shifting Policy

  • This marks a departure from neglecting the islands for decades.
  • Previously under the Home Ministry, access was restricted.
  • The NDA government recognizes the strategic and economic potential of the islands.

Historical Context

  • The British Raj valued islands for trade and power projection.
  • Independent India initially focused on land borders and internal development.
  • The Indian Navy advocated for a stronger maritime focus in the 1990s.
  • Limited political will and bureaucratic inertia hampered progress.

China’s Influence as a Catalyst

  • China’s growing naval presence in the Indian Ocean spurred India to action.
  • China established bases and facilities in key littoral locations.
  • China understands the strategic importance of islands and has engaged with island nations in the Indian Ocean.

India’s Strategic Response

  • India is developing its Andaman and Nicobar Islands to counter China’s influence.
  • China views the Andamans as a “metal chain” restricting its access to the Indian Ocean.
  • India must swiftly execute its plans to solidify its strategic position.

Conclusion

  • India’s focus on developing the Andaman and Nicobar Islands is a welcome step towards maritime security.

 

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