State’s Financial Landscape | 28 Oct 2024

Why in News?  

Recently, the assembly election in Jharkhand has intensified, with both the ruling and opposition alliances launching economic initiatives aimed at garnering voter support.

Key Points

• Revenue Generation:  
  • Jharkhand generates only about 30.8% of its revenue receipts through its own tax collection, creating dependency on central government allocations. 
• Pension Schemes: 
  • The state has expanded a universal pension scheme, reducing the age of eligibility from 60 to 50 for marginalized groups (Dalits, Adivasis, and women). 
  • The government supplements central pension funds, adding Rs. 240.4 crore to ensure that each recipient gets a monthly Rs. 1,000. 
• Committed Expenditures:  
  • Salaries, pensions, and interest payments absorbed over one-third of Jharkhand’s revenue receipts in FY24, limiting fiscal flexibility for development projects. 
• Capital Expenditure Focus: 
  • Jharkhand has prioritized capital expenditure, aiming to reach 7.89% of its GSDP in FY25, a substantial rise from 2.91% in FY15. 
  • The state’s capex-GSDP ratio is higher than many states, with a recent 7.57% in FY24, well above the national average of approximately 4.9%. 
  • Higher capex helps in creating assets that may boost long-term growth, despite current fiscal constraints. 

• Fiscal Surplus and Debt Challenges 
  • Jharkhand has remained revenue-surplus for most years, except in FY15 and during the COVID-19 pandemic in FY21, maintaining a fiscal deficit of 2% (down from a high of 5.2% in FY21). 
• Debt-to-GSDP Ratio: 
  • Jharkhand’s debt-to-GSDP ratio peaked at 36% in FY21 and remains high, projected at around 27% for FY25, though previous estimates have been revised upwards. 
  • The Reserve Bank of India ranked Jharkhand among the top 10 states with the highest debt-to-GSDP ratios, highlighting concerns over long-term debt sustainability. 
• Economic Indicators and Social Challenges 
  • Unemployment: Jharkhand has a relatively low unemployment rate of 1.3% (2023-24), significantly below the national average of 3.2%. 
  • Poverty Levels: Jharkhand faces high multidimensional poverty, with 28% of residents experiencing deprivation, second only to Bihar (33.7%). 
• Inflation: 
  • Overall Inflation: Declined to 3.8% in the first half of the financial year, below the national rate of 4.6%. 
  • Food Inflation: Rose to 8.9% in September, higher than the national 8.4%, while the average food inflation rate from April to September was 6.7%, still below the national trend. 
• Conclusion: With the Jharkhand Assembly elections approaching, both the ruling coalition and opposition alliance are engaging in competitive social welfare and economic proposals to sway the electorate, amidst a backdrop of fiscal challenges, poverty, and inflationary pressures.