Balance from Current Revenues: 4.23 The aggregate balance from the current revenues of the Central and State Governments, after meeting their current non-Plan expenditure, is estimated at (-)Rs. 5,249 crores at 1984-85 rates of taxation. The estimate takes into account the normal growth of tax and non-tax revenues in the light of past trends, their likely response to the anticipated growth of production and incomes in the coming years and improvement in the collections. The provision of the States' share in Central taxes and statutory grants for the period 1985-90 is made on the assumption that the recommendations of the Eighth Finance Commission applicable to 1988-89 would also apply to the terminal year of the plan. Adjustments in the resources of the Centre and the States to take care of the recommendations of the next Finance Commission would be made as and when the Government's decision thereon is made applicable.
4.24 On the expenditure side, moderate annual increases have been allowed to meet the normal growth of various items of non-plan expenditure. Besides, adequate provisions have been made to ensure proper maintenance of various assets created through public sector investments over the last six plans, such as roads, irrigation systems, public buildings and other facilities. Unless strict financial discipline is enforced and the
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growth of non-plan expenditure effectively controlled, the balances estimated on revenue account are likely to deteriorate further and consequently create an imbalance in the financing of the approved outays.
Central Government 4.25 The total revenue receipts of the Centre at 1984-85 levels of tax rates have been estimated at Rs. 138,399 crores for the Seventh Plan period, after transferring to the States their share in the Central taxes. The non-plan revenue expenditure is estimated at Rs. 150,410 crores, thus leaving a negative balance of Rs. 12,011 crores for the plan. The broad details of the estimate are shown in Table 4.9.
TABLE 4.9
Balance from Current Revenues-Centre (1985-90)
(Rs. crores at 1984-85 prices)
Amount
I. Revenue receipts
1. Tax revenues (gross) 138,941
2. Less: States' share of Central taxes (-)36,087
3. Tax revenues (net) 102,854
4. Non-tax revenues 35,545
Total revenue receipts 138,399
II. Non-Plan revenue expenditure
1. Interest payments 46,222
2. Subsidies 16,805
3. Defence 45,000
4. Other non-development expenditure 33,911
5. Maintenance expenditure on Sixth Plan Schemes 1,684
6. Grants to States, Union Territories and
Local bodies 6,135
7. Grants to foreign Governments 653
Total non-plan revenue expenditure 150,410
III. Balance from current revenues (I-II) (-) 12,011
4.26 The estimate of the balance from current revenues of the Centre is based on the following major assumptions:
(i) The revenues from the major taxes, viz., income tax, union excise duties and customs have been estimated on the basis of the same growth rates as adopted by the Eighth Finance Commission for the projections of such receipts for 1984-89.
(ii) With the growing importance of borrowings in the financing of the public sector plan, almost one-third of the outgo from the non- plan revenue expenditure of the Centre is accounted for by interest payments. The estimate for the next five years is worked out on the basis of the prevailing rates of interest on different categories of loans and takes into account both the outstanding loans/credits as also the likely level of fresh borrowings on a net basis for the Seventh Plan period.
(iii) A significant proportion of the non-plan revenue expenditure is currently being provided to subsidise certain activities outside the plan, which have a direct bearing on the growth of the economy aimed at in the plan or are considered essential for maintaining price stability. This mainly includes subsidies on fertilisers, food and export promotion. Since it is essential to maximise the resources for the plan, the provision for subsidies for the next five years has been kept at the minimum needed for ensuring that the overall output growth and price stability were not adversely affected.
(iv) The estimate includes provisions in respect of additional D.A. instalments sanctioned by the Centre upto the end of 1984- 85. However, fresh expenditure liability which is likely to devolve on the Centre as a result of the recommendations of the Fourth Pay Commission has not been taken into account as its magnitude is not known at this stage.
(v) Necessary provisions for security environment as well as for maintenance of assets created under the Sixth Plan schemes have been made to arrive at the balance from current revenues.
State Governments 4.27 The combined revenue receipts of all the State Governments for the Seventh Plan period have been estimated at Rs. 141,124 crores at 1984-85 levels of tax-rates and fees. As against this, the non- plan revenue expenditure for the same period is estimated at Rs. 134,362 crores. Thus, a net balance of Rs. 6,762 crores from current revenues would be available for financing the plan in the State sector. The broad details of the estimate are shown in Table 4.10. Detailed discussions were held with the officials of the State Governments to estimate the growth of revenue receipts and non-plan expenditure for the plan period. The tax receipts of the State Governments have been projected keeping in view the trends observed during the past years and the growth rates adopted by the Eighth Finance Commission for the individual States for differnt taxes. The non-tax revenues under 'Forests' have been estimated to increase at a rate in accordance with the programmes of the State Governments under forestry working plans.
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TABLE 4.10
Balance from Current Revenues-States (1985-90)
(Rs. crores at 1984-85 prices)
Amount
I. Revenue receipts
1. Tax revenues 79,396
2. Non-tax revenues 20,425
3. Share in central taxes 36,087
4. Grants from the centre 5,216
Total revenue receipts 141,124
II. Revenue expenditure
1.Debt services 20,351
2. Other non-developmental and non-
plan developmental expenditure 106,019
3. Maintenance expenditure on Sixth Plan
schemes 7,992
Total revenue expenditure 134,362
III. Balance from current revenues (I-II) 6,762
4.28 As regards provision for non-plan expenditure, except in the case of certain important areas, such as roads and bridges, hospital and medical services, public buildings, police, etc., where higher growth in expenditure has been allowed with a view to ensuring optimum utilisation of capital assets and services already created, in all other areas, the expenditure growth of around 5 per cent per annum has been assumed. Besides, full provision has been made for the cost of all increases in the emoluments sanctioned by the State Governments for their employees, school teachers and employees of local bodies upto the end of 1984-85. In some States, Pay Committees have been appointed and State Governments have taken decisions to implement their recommendations. The liability arising as a result of such decisions on the part of the concerned State Governments has been provided to the extent firm estimates were available.
Contribution from Public Enterprises 4.29 The gross surplus of public enterprises (retained profit plus depreciation), on the basis of 1984-85 rates of tariffs, fares and product prices, is estimated at Rs. 35,485 crores as shown in the Table 4.11.
TABLE 4.11
Contribution from Public Enterprises (1985-90)
(Rs. crores at 1984-85 prices)
Enterprises Amount
1. Railways 4,225
2. Posts & Telegraphs 1,729
3. Other central enterprises 31,500
4. State Electricity Boards (-)1,569
5. State Road Transport Corporations (-)415
6. Other state enterprises 15
Total 35,485
Railways 4.30 The gross surplus of Railways during the Plan period is estimated at Rs. 4,225 crores which comprises mainly the depreciation provision. This estimate is based on the anticipated growth in freight and passenger traffic.
Posts & Telegraphs 4.31 In the case of Posts and Telegraphs, the gross surplus is estimated at Rs. 1,729 crores comprising Rs. 2,482 crores from the telecommunication wing and (-)Rs. 753 crores from the postal wing, based on the anticipated growth of telecommunication and posts and telegraphs services during the plan period.
Other Central Enterprises 4.32 The contribution of 'Other Central Enterprises' including Ports and DVC, taken together, is estimated at Rs. 31,500 crores as shown in the Table 4.12. The generation of the surpluses of this order assumes better capacity utilisation, improvement in operational efficiency and increase in productivity which is the basic thrust of the Seventh Plan.
TABLE 4.12
Contribution of Other Central Enterprises
(Rs. crores at 1984-85 prices)
Amount
I. Gross internal resources
(i) Retained profits 5,184
(ii) Depreciation 24,893
(iii) Deposits etc. 1,698
Total I 31,775
II. Utilisation
(i) Loan repayments 4,917
(ii) Working capital 2,600
(iii) Other charges 317
Total II 7,834
III. Total internal resources available for the Plan 23,941
IV. Accrual to Oil Industry Development Board 5,259
V. Accrual on account of Steel Development Fund 2,300
Total (III+IV+V) 31,500
State Enterprises 4.33 Among the State enterprises, the major ones, viz., State Electricity Boards and State Road Transport Corporations taken together are expected to incur cash losses at the existing levels of tariffs and fares which are reckoned at Rs. 1,984 crores during the Seventh Plan period.
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Market Borrowings 4.34 Taking into account the recent increase in the statutory liquidity ratio of bank investments in the securities of the Government and the relevant provisions governing the deployment of funds in such securities by other institutional subscribers, the net market borrowings for the plan period have been estimated at Rs. 36,108 crores. This estimate is derived on the assumption of a reasonably buoyant growth in the deposits of commercial banks through branch expansion and other measures and a significant increase in the investible resources of other subscribers like Life Insurance Corporation and Employees' Provident Fund.
4.35 Out of Rs. 36,108 crores of aggregate market borrowings, Rs. 30,562 crores are proposed to be drafted for financing the public sector outlay, leaving the balance amount of Rs. 5,546 crores to be shared amongst the financial institutions. Of the available market borrowings for financing public sector outlay, Rs. 20,620 crores are allocated for financing the Central plan and the remaining Rs. 9,942 crores for financing the State plans. On this basis, the States' share of market borrowings works out to about 33 per cent and Centre's to 67 per cent.
4.36 Out of Rs. 9,942 crores of market borrowings provided for the State plans, an amount of Rs. 7,012 crores is distributed amongst the States by allowing a uniform step up over the base year level. Besides, market borrowings of Rs. 2,930 crores have been allocated to relatively less developed States for accelerating the tempo of development in those States.
Small Savings 4.37 The contribution to small savings collections has registered a significant rise over the past few years from Rs. 1,121 crores in 1980-81 to Rs. 3,300 crores in 1984-85. Taking into account the growth of households' contribution to small savings as well as from other agencies like the Employees' Provident Funds and other provident funds in the private sector in the light of the observed trend, the total collection of small savings over the plan period is estimated at Rs. 17,916 crores.
State Provident Funds 4.38 For the Seventh Plan, net accruals to State Provident Funds have been estimated at Rs. 2,300 crores for the Centre and Rs. 5,027 crores for the States in the light of past trends, existing rates of contribution and anticipated increase in employment under the Central and State Governments.
Miscellaneous Capital Receipts 4.39 This item represents the net balance of receipts and disbursements under a number of budget heads. The capital receipts include recovery of loans and advances from agriculturists, Government employees, local bodies, etc., deposits of non-governmental provident funds and net accretion to deposits and funds. Allowing for the likely non-plan loans and advances to the public sector undertakings, Government employees, agriculturists and foreign governments, subsidy on imported fertilizers and adjustment of States' overdraft as on 31st March, 1985, the net balance under this head for the Centre and States is estimated at Rs. 12,618 crores.
Term Loans from Financial Institutions 4.40 The financial institutions, viz., Life Insurance Corporation, General Insurance Corporation, Rural Electrification Corporation and National Bank for Agriculture and Rural Development are estimated to extend loans totalling Rs. 3,539 crores to the States for various programmes in the fields of housing, water supply, power, transport and agricultural co-operatives. Further, Industrial Development Bank of India under its Bills Rediscounting Scheme is expected to provide Rs. 1,100 crores for the State Plans. The broad details of the loan funds estimated to flow from the financial institutions are shown in Table 4.13.
TABLE 4.13
Term Loans from Financial Institutions to States: (1985-90)
(Rs. crores at 1984-85 prices)
Institutions Amount
1. Life Insurance Corporation/General Insurance
Corporation 2,335*
2. Reserve Bank of India (NABARD) 222
3. Rural Electrification Corporation 982
4. Industrial [Development Bank of India 1,100
Total 4,639
* Includes Rs. 100 crores of LIC loan to North Eastern Council.
Note:-The negotiated loans indicated above are in gross terms since repayments to these institutions have been provided for separately.
Additional Resource Mobilisation 4.41 The additional resource mobilisation by the Centre and the States including their enterprises is envisaged at Rs. 44,702 crores for the Seventh Plan. The specific measures to be adopted by the Centre and the States will have to be decided in the light of the economic situation as it emerges from year to year. However, the choice between different forms of resource raising measures would have to be such as to secure the requisite resources in a non-inflationary manner as also to stimulate growth, productivity and savings.