4.1  Honourable Members are aware that from the year 1999-2000 onwards, the Government of West Bengal, along with other State Governments started facing a financial crisis. The four factors which were primarily responsible for this financial crisis are: (1) the natural impact of the revision of pay of the Central Government employees on the basis of the recommendations of the Fifth Central Pay Commission resulting in revision of pay of State Government employees and others with steep increase in expenditure towards payment of salaries and non-availability of assistance from the  Government of India in terms of the discussions in the meeting of the National Development Council (February 19, 1999), (2) increase in the burden of the Central loans on the States due to national policies, (3) shortfall in the State’s share of Central taxes in relation to the amounts estimated by the Eleventh Finance Commission and (4) shortfall in the collection of State’s own tax revenue. While the shortfall in the collection of State’s own tax revenue is a weakness at the State level, all other factors are intrinsically linked to the policies of the Central Government.

4.2  The combination of the factors mentioned above led to a serious deterioration in the financial position of the State Government beginning from 1999-2000. The ratio of revenue deficit to revenue receipts, which was 25.41 per cent in 1997-98, increased to 90.95 per cent in 1999-2000, the ratio of fiscal deficit to State Domestic Product (SDP) increased from 4.09 per cent in 1997-98 to 8.66 per cent in 1999-2000, the ratio of outstanding debt to SDP continued to increase from 25.55 per cent in 1997-98 reaching 50.75 per cent in 2004-05, interest payment as percentage of revenue receipts increased steadily from 26.70 in 1997-98 to 55.46 in 2003-04, the aggregate expenditure on salary, pension and interest payment as percentage of revenue receipts increased from 95.12 in 1997-98 to 152.71 in 1999-2000 and the State’s plan expenditure started falling from 2001-02 reaching a level of only Rs. 2,529 crore in 2003-04.

4.3  Confronted with this situation, the State Government repeatedly raised, on the basis of data and analysis, a demand for solution to those problems which are linked to the policies of the Central Government, namely, shortfall in the State’s share of Central taxes and the burden of the Central loans on the State, before the Government of India and later before the Twelfth Finance Commission. There has, however, been practically no response from the Government of India and no effective relief from the recommendations of the Twelfth Finance Commission, and the justified demands of the State Government still remain unattended. The State Government has, however, taken concrete steps in regard to issues which fall in the domain of the State Government like increasing the collection of State’s own revenue and reduction of wasteful non-plan expenditure in order to come out of the difficult financial situation.

4.4  As a result of special emphasis given by the State Government on increasing its own tax revenue through implementation of Value Added Tax and improvement of tax administration and also reduction of non-plan revenue expenditure through better financial management, the average annual rate of growth of State’s own revenue over the period from 1999-2000 to 2007-08 has been 13.20 per cent while the annual rate of growth of non-plan revenue expenditure over the same period has been 8.32 per cent. Honourable Members would be happy to know that in the current financial year (2007-08), the State’s own tax revenue has grown by about 17.78 per cent. This has resulted in a significant improvement in the indicators of financial performance of the State Government. The ratio of revenue deficit to revenue receipts has come down from 90.95 per cent in 1999-2000 to 25.95 per cent in 2007-08. The ratio of fiscal deficit to SDP has fallen from 8.66 per cent in 1999-2000 to 4.04 per cent in 2007-08 and the aggregate of salary, pension and interest payment as percentage of revenue receipts has fallen from 152.71 in 1999-2000 to 89.84 in 2007-08.