Syllabus: GS-III & V: Budgeting

Why in the news?

A recent CAG report tabled in the Assam Legislative Assembly highlighted a 103% rise in Assam’s outstanding debt within four years, raising concerns over fiscal sustainability.

Understanding Assam’s Debt Surge: What the Numbers Reveal

Assam’s outstanding debt has increased sharply from ₹72,256.52 crore in 2019–20 to ₹1,46,927.84 crore in 2023–24, marking a 103.34% jump. This rapid escalation has pushed the liabilities-to-GSDP ratio from 20.83% to 25.77%, crossing ideal fiscal comfort levels.

The key reason, according to CAG, is the heavy dependence on open-market borrowings—a trend common in states facing high revenue pressure but worrying when combined with rising repayment obligations.

Why is the Debt Spike Concerning?

1. Rising Debt = Higher Repayment Pressure

• 70.76% of Assam’s debt repayments fall within the next 3–10 years, creating a repayment bulge.
• When loans are taken to repay older loans, fiscal flexibility shrinks.

2. Off-Budget Borrowings Mask Real Debt

CAG flagged the use of off-budget borrowings—loans taken through agencies or public sector units without showing them in the state Budget.

• This hides actual liabilities
• Defers repayment
• Reduces transparency
• Weakens future fiscal stability
  

3. Revenue Stagnation + Rising Freebies = Fiscal Stress

High spending on cash-based welfare schemes, subsidies and DBT outflows compete with investment needs.
The recent inability to execute a 320-metre bridge in Chhaygaon due to lack of World Bank funds shows the fragile nature of capital spending.

Key Terms Explained 

• Outstanding Debt: Total unpaid loans accumulated over time.
• Debt–GSDP Ratio: Shows how big the debt is compared to the State’s economy—higher ratio = less fiscal space.
• Off-Budget Borrowing: Loans taken through agencies instead of the government Budget to hide real borrowings.
• Open-Market Borrowings (OMBs): Loans raised by issuing state government bonds.
• Fiscal Sustainability: Ability of a government to repay debt without compromising future development needs.
• Revenue Mobilisation: Increasing state taxes, fees, royalties, or non-tax income.
  

What are the CAG Report Signals?

The trends point to:

• Increasing dependence on borrowings for even basic infrastructure
• Shrinking room for essential capital expenditure
• Growing interest burden, which does not create assets
• Medium- and long-term fiscal sustainability risks
• Mismatch between welfare expenditure and revenue growth
  

This trajectory can weaken Assam’s resilience to shocks such as floods, global economic slowdowns, or commodity price fluctuations.

How Assam Can Course-Correct?

1. Strengthen Revenue Mobilisation

• Improve GST compliance, reduce evasion
• Expand tax base through better digital tracking
• Increase royalty efficiency from oil, tea, natural gas, and mining
• Leverage industrial zones under Advantage Assam
  

2. Prioritise Productive Capital Expenditure

• Roads, bridges, water systems, irrigation, energy
• Asset-building projects that generate long-term revenue
  

3. Curb Non-Essential Expenditure

• Rationalise subsidies
• Strengthen audit of welfare schemes
• Reduce administrative waste
  

4. Transparent Fiscal Planning

• Disclose all liabilities, including off-budget borrowings
• Publish a medium-term fiscal strategy document
  

5. Improve Public Sector Efficiency

• Strengthen PSUs
• Encourage PPP models for infrastructure
• Monetise underutilised assets
  

Exam Hook 

Key Takeaways

• Assam’s debt doubled from 2019–20 to 2023–24 (₹72k cr → ₹1.46 lakh cr).
• Debt–GSDP ratio rose to 25.77%, indicating rising vulnerabilities.
• CAG flagged off-budget borrowings and poor fiscal transparency.
• 70% of repayment obligations lie within the next decade.
• Need for revenue mobilisation, expenditure rationalisation, and asset creation.
  

Mains Question

“Assam’s rising debt burden reflects deeper structural weaknesses in its fiscal architecture. Examine the causes, implications, and corrective measures needed to ensure long-term fiscal sustainability.” (Answer in 150–250 words.)

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