What is Core & Satellite strategy?

In the coming days, if any state government stops free electricity and starts increasing the electricity bill, or increases VAT on petrol and diesel, or starts charging more tax on liquor, then don’t be surprised. Because the fianancial position of many state governments is such that they have to take huge loans to meet the expenses. And there is also a limit for taking loans. As soon as that limit is hit, the state governments will either have to stop free facilities, or will have to increase their income by raising taxes.

Union Finance Minister Nirmala Sitharaman put the debt figures of all the states in the House on Monday in response to a question asked about the debt of the states in Parliament. The data shows that there are 6 states in the country whose total debt till March this year is more than Rs 5 lakh crore. Among these states, Tamil Nadu ranks first, with a total debt of Rs 7.54 lakh crore at the end of March 2023, followed by Uttar Pradesh with a debt of Rs 7.10 lakh crore and Maharashtra with a debt of Rs 6.80 lakh crore. Apart from these, West Bengal has a debt of Rs 6.08 lakh crore, Rajasthan Rs 5.37 lakh crore and Karnataka Rs 5.35 lakh crore.

According to statistics, during the financial year 2022-23, barring a few, double digit growth has been seen in the debt of most of the states. During the financial year 2022-23, an increase of 33 percent has been registered in the total outstanding loan of Delhi. The total outstanding loan on Delhi has increased to Rs 21,959 crore, which was only Rs 3,406 crore during the financial year 2018-19. Apart from these, the debt of Rajasthan, Assam, Madhya Pradesh and Tripura has also increased by more than 15 percent.

Odisha is the only state in the country which is continuously reducing its debt burden. During the financial year 2020-21, there was a decline of 1.8 per cent in the outstanding loan of Odisha, which came down to 8.4 per cent in 2021-22 and a major decline of 12 per cent in 2022-23. Odisha’s outstanding loan has come down to Rs 1.13 lakh crore, which used to be Rs 1.43 lakh crore during the financial year 2019-20.

In view of the increasing debt on the states, now government banks have also reduced their debt. According to the figures provided by the Finance Ministry, during the financial year 2022-23, the loans given by the public sector banks to the states have declined by more than 16 percent. During the financial year 2021-22, a loan of Rs 4.93 lakh crore was given by the national government banks to the state corporations and their PSUs, and during the financial year 2022-23 this figure came down to Rs 4.12 lakh crore. In view of the ever-increasing debt burden on the state governments, the banks have reduced their loans and if the condition remains the same, the banks will further cut the loans, due to which the states may face difficulty in running their business and they will have to emphasize on increasing the earnings, which means that taxes may increase in the states.