RBI praises West Bengal's effort to mobilise higher revenue

KOLKATA: Reserve Bank of India, the lender of the last resort, has expressed satisfaction over West Bengal's ability to grow own revenue even as the state is facing severe stress with its outstanding debt rising every year.

"Revenue augmenting capacity improves in West Bengal, The state may cut down borrowing to reduce fiscal stress" RBI Deputy Governor HR Khan said Friday.

West Bengal is carrying a burden of Rs 2.74 lakh crore of outstanding debt.

RBI Governor Raghuram Rajan said he met state finance cum industry minister Amit Mitra over a dinner and discussed the state's financial health and the challenges it is facing.

The state is in a virtual debt trap as it is forced to borrow to service debt and pay salary and pension to state government employees.

According to state finance minister Amit Mitra, the state raised Rs 82,946 crore in the first four years of Trinamool Congress rule, out of which Rs 76,346 crore was spent towards interest and principal repayment. The situation is set to worsen in 2016-17 when a sizeable part of the loan is going mature.

The central bank helps every state to raise funds from the market and also provides overdraft facilities to states whenever there is a liquidity mismatch.

Bengal's fiscal deficit as percent of gross state domestic product was 3% for FY15 with revenue deficit at 1.3%, which were improvements compared to preceding fiscal.