(1) The State Government shall be guided by the following fiscal management
principles:-
(a) To maintain Government debt at prudent levels;
(b) To manage guarantees and other contingent liabilities prudently, with
particular reference to the quality and level of such liabilities;
(c) To ensure that policy decisions of the Government have due regard to
their financial implication on future generation;
(d) To ensure that borrowings are used on development activities, which are
evaluated to become self-sustained, and creation or augmentation of
capital assets, and are not applied to finance current expenditure.
(e) To ensure a reasonable degree of stability and predictability in the level of
tax burden;
(f) To maintain the integrity of the tax system by minimising special
incentives, concessions and exemptions;
(g) To pursue tax polices with due regard to economic efficiency and
compliance costs;
(h) To pursue non-tax revenue policies with due regard to cost recovery and
equity;
(i) To pursue expenditure policies that would provide impetus to economic
growth, poverty reduction and improvement in human welfare;
(j) To build up a revenue surplus for use in capital formation and productive
expenditure;
(k) To ensure that physical assets of the Government are property maintained;
(l) To disclose sufficient information to allow the public to scrutinize the
conduct of fiscal policy and the state of public finance;
(m) To ensure that Government uses resources in ways that give best value for
money and also ensure that public assets are put to best possible use;
(n) To minimize fiscal risks associated with running of public sector
undertakings and utilities providing public goods and services;
(o) To manage expenditure consistent with the level of revenue generated;
(p) To formulate budget in realistic and objective manner with due regard to
the general economic outlook and revenue prospects and minimize
deviations during the course of the year;
(q) To ensure discharge of current liabilities in a timely manner.
(2) The State Government shall take appropriate measures to eliminate the
revenue deficit and control the fiscal deficit at sustainable level and built up
adequate revenue surplus.
(3) In particular, and without prejudice to the generality of the foregoing
provisions, the State Government shall—
(a) reduce the revenue deficit to nil in the four years starting from 01
st April,
2011 and ending on 31st March, 2015;
1
(b) reduce revenue deficit as percentage of Gross State Domestic product in
each of the financial years referred to a clause (a) in a manner consistent
with the goal set out in clause (a);
(c) (1) The Fiscal deficit targets and annual borrowing limits for the State
during the period 2016-17 to 2019-20 are enunciated as follows-
(i) Fiscal deficit of the State will be anchored to an annual limit of 3 percent
of GSDP. The State will be eligible for flexibility of 0.25 percent over
and above this for any given year for which the borrowing limits are to be
fixed if the debt- GSDP ratio is less than or equal to 25 percent in the
preceding year.
(ii) The State will be further eligible for an additional borrowing limit of 0.25
percent of GSDP in a given year for which the borrowing limits are to be
fixed if the interest payments are less than or equal to 10 percent of the
revenue receipts in the preceding year.
(iii) The two options under these flexibility provisions can be availed can be
availed by the State either separately, if any of the above criterion is
fulfilled, or simultaneously if both the above stated criterion are fulfilled.
Thus, the State can have a maximum fiscal deficit GSDP limit of 3.5
percent in any given year.
(iv) The flexibility for availing the additional limit under either of the two
options or both will be available to the State only if there is no revenue
deficit in the year in which borrowing limits are to be fixed and the
immediately preceding year.
(2) If the State is not able to fully utilize its sanctioned borrowing limit of 3
percent of GSDP in any particular year during the financial year between
2016-17 to 2018-19 it will have the option of availing this unutilized
borrowing amount (calculated in Rs.) only in the following year within the
fourteenth finance commission award period of 2017-18 to 2019-20. The
amount including unutilized borrowing amount will be limited to 3-5 of
GSDP. 1
(d) reduce fiscal deficit as percentage of Gross State domestic product in each
of the financial years referred to in clause (a) in a manner consistent with
the goal set out in clause (c);
(e) not to give guarantee for any amount exceeding the limit stipulated under
any rule or law of the State Government existing at the time of the coming
into force of this Act or any rule or law to be made by the State Government
subsequent to coming into force of this Act;
(f) ensure that during the period of four financial years starting form 1st April,
2011 and ending on 31st March, 2015 the total estimated debt liability does not
exceed 41.10, 40.00, 38.50 and 37.20 percent respectively of its estimated
gross state domestic product:
Provided that revenue deficit and fiscal deficit may exceed the limits
specified under this sub-section due to ground or grounds of unforeseen demands
on the finance of the State Government due to internal security or natural
calamity, subject to the condition that the excess beyond limits arising due to
natural calamities does not exceed the actual fiscal cost that can be attributed to
the calamities:
Provided further that the ground or grounds specified in the first
proviso shall be placed before the State Legislature, as soon as possible, after it
becomes likely that such deficit amount may exceed the aforesaid limits, with
accompanying report stating the likely extent of excess, and reasons therefor;2
(g) The State Government shall constitute a committee under the chairmanship of
the Chief Secretary, to review the progress against above targets at least once every
six months.3
1-Substituted by section 2 (i) of Uttarakhand Act No. 07 of 2011. 2- Subs. by section 2 (ii) ibid. 3. Added by section 2 (iv) ibid.