The Meghalaya government has disagreed with the findings of the recent ‘State Finances Audit Report’ of the Comptroller and Auditor General (CAG) regarding the State’s increasing fiscal deficit and huge outstanding debt.
The CAG in the report had said that Meghalaya’s GSDP growth in 2021-22 and 2022-23 lagged behind the national GDP growth rates of 18.36 per cent and 16.06 per cent respectively.
The report also stated that the State’s fiscal deficit increased from 5.71 per cent in 2021-22 to 6.55 per cent in 2022-23 which is above the target of 4 per cent set under the Meghalaya Budget Management and Responsibility (Amendment) Act 2022.
Further, the CAG mentioned that the outstanding Debt-GSDP ratio was 43.19 per cent in 2022-23, missing the Meghalaya FRBM Act target of 28 per cent.
However, in a statement issued today, Commissioner & Secretary (Finance), Vijay Kumar said that the CAG’s report on GSDP numbers was finalised much prior to the release of the revised GSDP numbers by the Ministry of Statistics and Programme Implementation (MOSPI) in August 2024.
Kumar said that the GSDP figures shown by the CAG for 2021-22 was Rs 38,785 and for 2022-23 the figure was Rs 42,697.
He also said that the figures on GSDP as per MOSPI updated figures in 2021-22 was Rs 40, 222 while in 2022-23 the GSDP (MOSPI updated figures) was Rs 46,551.
“Meghalaya’s GSDP growth narrative undergoes a significant revision with updated MOSPI figures. Integrating latest MOSPI data, Meghalaya’s economic growth exhibits a remarkable 17.4 per cent CAGR from FY 2020-21 to FY 2022-23. With a robust 11.14 per cent CAGR from FY 2019-20 to FY 2023-24, Meghalaya is poised to reach its $10-billion economy target by 2027-28, aligning with strategic objectives,” Kumar said.
Further, Kumar said that post Covid, the Government of India launched a ‘Special Capital Assistance to States for Capital Investment’ (SASCI/CAPEX) for capital expenditure projects, which provides 50-year interest free loans to states.
“It is linked to quality of expenditure and performance of the State in utilising CAPEX which Meghalaya has been effectively utilising. Consequently, the release from the Centre has increased from Rs 200 crore in 2020-21, Rs 281 crore in 2021-22 to Rs 1,049 crore in 2022-23 and Rs 1,293 crore in 2023-24. Moreover, in 2024-25 the State is expected to receive Rs 2,085 crore,” Kumar added.
According to him, since this loan is provided for 50-year interest free it is more like a grant to the states, though being kept as part of fiscal calculations of the State by the CAG and Government of India. “Hence, to get the real status of the fiscal deficit of the State and outstanding debt, the same is to be excluded from the calculation of the fiscal deficit and Debt-GSDP,” he said.
On the fiscal deficit of Meghalaya, Kumar said that the Government of India tightly controls the level of deficit that the states can incur and the permissible limit for the year 2022-23 is 4 per cent of the GSDP.
He pointed out that the fiscal deficit (FD) as a percentage of GSDP as shown by the CAG in 2018-19 was 6.14 per cent while in 2022-23 it was 6.55 per cent.
“The fiscal deficit after Correction 1 (Revised GSDP by MOSPI) in 2018-19 was 6.30 per cent. In 2022-23 it was 6.01 per cent. The fiscal deficit after Correction 2 (Revised GSDP and excluding CAPEX) in 2018-19 was 6.30 per cent. In 2022-23 it was 3.75 per cent. Therefore, the fiscal deficit for the State after making both corrections is 3.75 per cent in 2022-23 which is well under the limit set by the Government of India,” Kumar said.
Stating that debt is a public finance instrument to boost growth which is used by all the countries to finance their infrastructure projects, Kumar said that the net borrowing limit of the states is determined by the Government of India and Meghalaya has always borrowed under the limits set by the Government of India.
“These borrowed funds are used effectively to invest in critical infrastructure. The Capital Expenditure for Meghalaya has almost doubled from Rs 1,903 crore in 2018-19 to Rs 3,362 crore in 2022-23. This indicates that debt has been effectively utilised and should be seen as a strategic investment in Meghalaya’s future, not a challenge or burden,” Kumar said.
He pointed out that the outstanding debt as a percentage of GSDP as per the CAG in 2018-19 was 32.22 per cent while in 2022-23 it was 43.19 per cent.
“The outstanding debt after Correction 1 (Revised GSDP by MOSPI) in 2018-19 was 33.02 per cent and in 2022-23 it was 39.62 per cent. The outstanding debt after Correction 2 (Revised GSDP and excluding CAPEX) in 2018-19 was 33.02 per cent. In 2022-23 it was 36.33 per cent,” Kumar said.
He also said that after making both the corrections, the Debt-GSDP figures are much lower at 36.3 per cent.
“These figures show a marginal increase as the borrowing limit was increased during Covid by the Government of India. The Finance Department has developed a mechanism to put the State finances on a sustainable debt path ensuring that the debt levels are within the prescribed limit to meet the twin objective of achieving the 10 billion dollar economy and maintaining fiscal prudence,” Kumar asserted.
