West Bengal might register a lower-than-targeted average growth of about 7.32 per cent in the Eleventh Plan period. The targeted growth for the period was set at 9.1 per cent.
According to a report by the rating agency Fitch Ratings, the slippage in growth is mainly on account of the State's dependence on grants for fiscal consolidation.
“Economic growth in 2011-12 is likely to remain same at 7.06 per cent (as in 2010-11), down from 9.84 per cent in 2009-10. This will result in Eleventh Plan period average real gross state domestic product (GSDP) growth of 7.32 per cent, much below the targeted 9.1 per cent,” the report said.
Though this would amount to the fourth largest slippage among major states, however, it would be higher than average growth of 6.33 per cent achieved in the Tenth Plan period.
West Bengal expects its current revenue to increase by 30 per cent to Rs 769 billion on a year-on-year basis and own tax revenue by 26 per cent to Rs 314 billion in 2012-13.
However, as the 2012-13 budget has proposed increasing taxes on luxury items, it will be a tough task for state tax administration to attain the projected own tax revenue growth next fiscal, the report said.
“Despite the slow pace of fiscal consolidation, higher nominal growth of the state economy in relation to interest rate on debt and a reduction in primary deficit provide some cushion to the fragile debt position of West Bengal,” said Mr Devendra Kumar Pant, director, Fitch's International Public Finance team.
The Central government's grants and assistance for the State Plan are likely to increase by 59.08 per cent and 96.46 per cent year on year, respectively, in 2012-13.
This grant and assistance would help West Bengal to build economic and social infrastructure, the report suggested.
The budget has pegged current expenditure growth at 9.66 per cent for 2012-13, lowest since 2005-06.
“Attaining high own tax revenue growth in a difficult economic scenario and limiting current expenditure growth to the proposed 9.66 per cent could be an uphill task for the state to achieve,” said Mr Siva Subramanian, analyst, Fitch's International Public Finance team.