Adopt reforms and VAT: survey to states

NEW DELHI: Worried over almost 6-fold rise in debt burden at Rs 9,13,103 crore in last 10 years, Economic Survey on Friday asked states to immediately switch over to Value-added Tax regime and adopt fiscal discipline through FRBM Act.

Proposing "harmonization" of fiscal reforms of Centre and states, the pre-budget survey pitched for implementations of the 12th Finance Commission recommendations like linking debt relief to reduction in deficit by states.

The survey attributed the growing spending on wages, pension, interest, losses of PSUs, lower transfer of funds from Centre and slower growth in tax revenues as the major cause of fiscal woes of states.

As a result of surge in expenditure, gross fiscal deficit of states mounted to Rs 1, 11,852 crore till 2003-04 from a meager Rs 18,787 crore in 1990-91, according to the survey.

Revenue deficit surged to Rs 43,718 crore till last fiscal from Rs 5,309 crore.

Unable to control their fiscal situations, states resorted to higher borrowing that led to piling up of their outstanding liabilities to Rs 9,13,103 crore till 2003-04 from Rs 1,60,075 crore in 1993-94.

"The fiscal stress of some of the state governments is more acute and an important constraint in their development. The revenue account of states has been continuously in deficit since 1987-88," the survey said suggesting sweeping reforms