Cap Expenditure On Welfare Schemes At 1% Of State GDP: SBI Report To SC Over Freebies

When looked at in relation to these states' own tax revenue, pension liabilities are quite high for Jharkhand, Rajasthan and Chhattisgarh at 217, 190 and 207 per cent respectively.

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New Delhi: As states compete to offer freebies, a report has suggested the Supreme Court-led panel to cap expenditure on such welfare schemes at 1 per cent of the state’s GDP (GSDP) or 1 per cent of its own tax collection, reported news agency PTI. Citing examples of just three states, a report drafted by Soumya Kanti Ghosh, the group chief economic advisor to State Bank of India, stated annual pension liabilities of states like Chhattisgarh, Jharkhand, and Rajasthan are estimated at Rupees 3 lakh crore, reported the news agency. 

When looked at in relation to these states' own tax revenue, pension liabilities are quite high for Jharkhand, Rajasthan and Chhattisgarh at 217, 190 and 207 per cent respectively.

While for states contemplating the change, it would be as high as 450 per cent of own tax revenue in case of Himachal Pradesh, 138 per cent of own tax revenue in case of Gujarat and 242 per cent of own tax revenue for Punjab, which is also planning to revert to the old pension system wherein the beneficiaries pay nothing. 

In his report, Ghosh also highlighted that according to the latest available information, the off-budget borrowings of states — loans raised by state-owned entities and guaranteed by the states — have reached around 4.5 per cent of the GDP in 2022 and the extent of such guarantees have achieved significant proportion of GDP for various states. 

The report has suggested that the apex court panel fix a band, say 1 per cent of GSDP or 1 per cent of state own tax collections or 1 per cent of state revenue expenditure for these welfare schemes. 

Such guarantee amount is significant at 11.7 per cent of GDP for Telangana, 10.8 per cent for Sikkim, 9.8 per cent for Andhra, 7.1 per cent for Rajasthan, and 6.3 per cent for UP. While the power sector accounts for almost 40 per cent of these guarantees, other beneficiaries include sectors like irrigation, infrastructure development, food and water supply.