Fiscal Management Principles

The Uttarakhand fiscal responsibility and Budget Management Act

Finance200510 sections

Read full ActSections

Statutory text

(1) The State Government shall be guided by the following fiscal management principles:- (a) To maintain Government debt at prudent levels; (b) To manage guarantees and other contingent liabilities prudently, with particular reference to the quality and level of such liabilities; (c) To ensure that policy decisions of the Government have due regard to their financial implication on future generation; (d) To ensure that borrowings are used on development activities, which are evaluated to become self-sustained, and creation or augmentation of capital assets, and are not applied to finance current expenditure. (e) To ensure a reasonable degree of stability and predictability in the level of tax burden; (f) To maintain the integrity of the tax system by minimising special incentives, concessions and exemptions; (g) To pursue tax polices with due regard to economic efficiency and compliance costs; (h) To pursue non-tax revenue policies with due regard to cost recovery and equity; (i) To pursue expenditure policies that would provide impetus to economic growth, poverty reduction and improvement in human welfare; (j) To build up a revenue surplus for use in capital formation and productive expenditure; (k) To ensure that physical assets of the Government are property maintained; (l) To disclose sufficient information to allow the public to scrutinize the conduct of fiscal policy and the state of public finance; (m) To ensure that Government uses resources in ways that give best value for money and also ensure that public assets are put to best possible use; (n) To minimize fiscal risks associated with running of public sector undertakings and utilities providing public goods and services; (o) To manage expenditure consistent with the level of revenue generated; (p) To formulate budget in realistic and objective manner with due regard to the general economic outlook and revenue prospects and minimize deviations during the course of the year; (q) To ensure discharge of current liabilities in a timely manner. (2) The State Government shall take appropriate measures to eliminate the revenue deficit and control the fiscal deficit at sustainable level and built up adequate revenue surplus. (3) In particular, and without prejudice to the generality of the foregoing provisions, the State Government shall— (a) reduce the revenue deficit to nil in the four years starting from 01 st April, 2011 and ending on 31st March, 2015; 1 (b) reduce revenue deficit as percentage of Gross State Domestic product in each of the financial years referred to a clause (a) in a manner consistent with the goal set out in clause (a); (c) (1) The Fiscal deficit targets and annual borrowing limits for the State during the period 2016-17 to 2019-20 are enunciated as follows- (i) Fiscal deficit of the State will be anchored to an annual limit of 3 percent of GSDP. The State will be eligible for flexibility of 0.25 percent over and above this for any given year for which the borrowing limits are to be fixed if the debt- GSDP ratio is less than or equal to 25 percent in the preceding year. (ii) The State will be further eligible for an additional borrowing limit of 0.25 percent of GSDP in a given year for which the borrowing limits are to be fixed if the interest payments are less than or equal to 10 percent of the revenue receipts in the preceding year. (iii) The two options under these flexibility provisions can be availed can be availed by the State either separately, if any of the above criterion is fulfilled, or simultaneously if both the above stated criterion are fulfilled. Thus, the State can have a maximum fiscal deficit GSDP limit of 3.5 percent in any given year. (iv) The flexibility for availing the additional limit under either of the two options or both will be available to the State only if there is no revenue deficit in the year in which borrowing limits are to be fixed and the immediately preceding year. (2) If the State is not able to fully utilize its sanctioned borrowing limit of 3 percent of GSDP in any particular year during the financial year between 2016-17 to 2018-19 it will have the option of availing this unutilized borrowing amount (calculated in Rs.) only in the following year within the fourteenth finance commission award period of 2017-18 to 2019-20. The amount including unutilized borrowing amount will be limited to 3-5 of GSDP. 1 (d) reduce fiscal deficit as percentage of Gross State domestic product in each of the financial years referred to in clause (a) in a manner consistent with the goal set out in clause (c); (e) not to give guarantee for any amount exceeding the limit stipulated under any rule or law of the State Government existing at the time of the coming into force of this Act or any rule or law to be made by the State Government subsequent to coming into force of this Act; (f) ensure that during the period of four financial years starting form 1st April, 2011 and ending on 31st March, 2015 the total estimated debt liability does not exceed 41.10, 40.00, 38.50 and 37.20 percent respectively of its estimated gross state domestic product: Provided that revenue deficit and fiscal deficit may exceed the limits specified under this sub-section due to ground or grounds of unforeseen demands on the finance of the State Government due to internal security or natural calamity, subject to the condition that the excess beyond limits arising due to natural calamities does not exceed the actual fiscal cost that can be attributed to the calamities: Provided further that the ground or grounds specified in the first proviso shall be placed before the State Legislature, as soon as possible, after it becomes likely that such deficit amount may exceed the aforesaid limits, with accompanying report stating the likely extent of excess, and reasons therefor;2 (g) The State Government shall constitute a committee under the chairmanship of the Chief Secretary, to review the progress against above targets at least once every six months.3

Study data processing for this section.

PDF: pending for this language.