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Brickwork Releases “State Finances - Brickwork Handbook 2012”

December 13, 2012 - Bangalore, Karnataka, India

Brickwork takes great pleasure to present the second edition Handbook on State Finances. Brickwork has unique criteria for rating State Governments that looks at the State’s willingness and ability to honor debt obligations. The criterion considers an analysis of political, economic, budgetary, financial and institutional variables deemed relevant to the State Government’s creditworthiness. The Handbook captures some of these variables and summarizes each State in a page. Similar variables for the Government of India are also presented for ready reference.


Return of Deficits:
State finances were in best of times last decade. They are now facing downturns in the economy and will find it difficult to maintain their revenue surplus and fiscal deficits.

Bihar the Best: Bihar has shown the highest GSDP growth rate. Gujarat has shown commendable performance with high growth rate in States with larger base. Karnataka finances continue to be strong. Maharashtra has the highest GDP base but lowest growth rate.

Agriculture: In 2011, the top five States with higher share of agriculture sector were Punjab, Madhya Pradesh, Bihar, Andhra Pradesh and West Bengal.

Manufacturing: Gujarat and Maharashtra again lead in manufacturing sector, which accounts for 26.4% in 21.4% of GSDP respectively. Other States having higher manufacturing sector share are Tamil Nadu (18.6%), Jharkhand (28.5%) and Chhattisgarh (22.3%).

Information Technology: The States that have taken the lead in the Information Technology sector are Karnataka, Tamil Nadu, Maharashtra and Andhra Pradesh. Together, these States accounted for about three fourth of India’s IT exports estimated at $100 Bn in 2011-12.

Low Interest Burden: The States average interest burden stands at a manageable 10.3% of total receipts. The Centre however has not set a good example for States with its own interest burden at almost 20% of total receipts.

Health: States spend on average 0.8% of GSDP on health. The best performing States like Goa and Kerala that have spent more on healthcare were able to gain better position in terms of various health indicators.

Fewer Daughters in Delhi: As against the country’s sex ratio of 940, Delhi, the national capital, has the worst sex ratio at 866 followed by Haryana (877) and Punjab (893). Kerala ranks best at 1084 females per thousand males followed by Tamil Nadu at 995, Andhra Pradesh (992) and Goa (991).

Education Spend: While Bihar has the lowest literacy rate, the State spends about 17% of the budget on Education. Uttarakhand, Orissa, Goa, Chhattisgarh and Jharkhand are other States that have comparable education spend.

Economic Services: Goa, Karnataka, Andhra Pradesh and Gujarat spend more on Economic Services. Agriculture and Irrigation accounts for bulk of expenditure in Economic Services, with over 10% of total budget allocated to this sector; Energy and Transport sectors account for about 4.5% each.

Urbanization: In addition to Goa and NCT Delhi, Tamil Nadu has emerged as the most urbanized major State of India followed by Kerala, Maharashtra and Gujarat.

Power Sector Challenges Continue: Most States have not liberalized the distribution sector that is seized with energy thefts, unaccounted T&D losses and irrational tariffs. The recent power outage in the Northern grid affected over 600 million population is an outcome of Government’s lack of support to improve the distribution system.

Big Bureaucracy: Jharkhand, Bihar, Uttarakhand and Punjab are the biggest spenders in administrative services while Delhi, Karnataka, Goa and Gujarat have been able to control administrative expenses.

Pension Problems: The pension liability of defined benefit plans is catching up with States. Bihar, Orissa, Tamil Nadu, Kerala spend maximum for pensions while Karnataka and Maharashtra have kept this item of expense reasonable.

Committed Expenses: For States such as Bihar, Himachal Pradesh, Rajasthan, West Bengal, Kerala, Odisha and Uttar Pradesh, these expenses are over 100% of revenue receipts and consequently reduce States’ flexibility to take up new projects in a meaningful way.

More Money - Fewer words: The State budgets paras on social sector schemes as percent of total paras in the budget speech are often more than 50%, however the share of social sector in total budget has been lower at 40%. On the other hand, general or administrative sectors accounts for only 5% of budget speech but receives over 30% of total budget allocation. Citizens need to demand productivity from the amount spent on general services which should reflect in faster disposal of files, reduction of corruption and simplification of license raj.

Demise of National Parties? The data for the 23 States in this report shows that Congress has on average 31% of assembly seats while BJP’s share is about 37%. On the other hand regional parties such as AIADMK, TMC, JD are powerful in Tamil Nadu, West Bengal, Bihar and Odisha respectively. The political scene shows a number of regional players. Since no national political party has been able to project a charismatic national leader acceptable to most States, the regional parties continue their dominance in the political scene. The Central Government would be compelled to decentralize more powers to the States.

Complimentary Seminar: Readers can log into and request for the executive summary. Brickwork offers a two hour complimentary seminar on public finances to senior executives of companies, Central & State Governments, Commercial Banks, Capital market intermediaries, Educational institutions, NGOs, etc. Interested persons may get in touch with to schedule a session.

About Brickwork Ratings:

Brickwork Ratings is a full service credit rating agency registered with Securities Exchange Board of India (SEBI). Brickwork has also been accorded ECAI status by Reserve Bank of India (RBI). In addition Brickwork is also recognized by National Small Industries Corporation for rating MSMEs. Brickwork has rated over Rs 200,000 Cr of Bonds / NCD of major commercial banks, large well known corporates, NBFCs, State and local Governments, Central and State PSUs, Insurance firms, etc. Brickwork is headquartered in Bangalore and has offices in Mumbai, New Delhi, Chennai, Kolkata and Hyderabad, apart from presence in 40 other cities. Ratings can be requested via email @ or calling 1-860-425-2742.

Source: Business Wire India


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