Himachal Pradesh Budget Analysis

2018-19
The Finance Minister of Himachal Pradesh, Mr. Jai Ram Thakur, presented the Budget for financial year 2018-19 on
March 9, 2018.
Budget Highlights
▪ The Gross State Domestic Product of Himachal Pradesh for 2018-19 (at current prices) is estimated to be
Rs 1,52,229 crore. This is 12% higher than the revised estimates for 2017-18.
▪ Total expenditure for 2018-19 is estimated to be Rs 41,440 crore, a 6.3% increase over the revised
estimate of 2017-18. In 2017-18, the revised estimates indicate that the expenditure is expected to be Rs
38,995 crore (9%) higher than the budget estimate.
▪ Total receipts (excluding borrowings) for 2018-19 are estimated to be Rs 31,660 crore, an increase of
8.1% as compared to the revised estimates of 2017-18. In 2017-18, total receipts exceeded the budgeted
estimate by Rs 343 crore.
▪ Revenue deficit for 2018-19 is targeted at Rs 3,168 crore, or 2.1% of the Gross State Domestic Product
(GSDP). Fiscal deficit is targeted at Rs 7,855 crore (5.2% of GSDP) for 2018-19.
▪ Departments of Rural Development, Tribal Development, and Health, Family and Welfare saw the highest
increase in allocations.
Policy Highlights
▪ Irrigation: A new scheme called ‘Jal Se Krishi Ko Bal’ has been launched with an outlay of Rs 250 crore
for the next five years. Under the scheme, new check dams and ponds will be constructed. As per the
budget, electricity for irrigation will be provided at 75 paisa per unit to farmers as compared to the existing
rate of one rupee per unit.
▪ Healthcare: Medical emergency assistance under the Himachal Pradesh Patrakar Yojana has been
increased from the Rs 50,000 to Rs 2,50,000.
▪ Education: In order to improve quality of education, the government has planned to establish 36 language
labs in schools across the state.
▪ Urban Development: The state government will devolve Rs 122 crore to urban local bodies in 2018-19 as
per the recommendations of the 5th State Financial Commission.

Himachal Pradesh Economy Figure 1: Growth in sectors (2011-12 prices)

10.4%

10.2%
10.0%
10.8%

▪ 12.0%
9.1%
Economic growth: The Gross State
9.0%

7.5%

Domestic Product (GSDP) of Himachal

7.2%

6.9%

Pradesh is estimated to grow at 6.9% in 8.0%

3.9%

2016-17 as compared to 2015-16.

▪ Sectoral growth: In the year 2017-17, the 4.0%
manufacturing sector contributed 455 to the
state’s economy. This was followed by 0.0%
services at 42%, and agriculture at 13%.
▪ The growth in the manufacturing sector -4.0%
-3.2%

-4.9%

decreased from 9% in 2014-15 to 7.2% in

2016-17. The services sector grew from -8.0%
10.2% in 2014-15 to 10.8% in 2016-17. Agriculture Manufacturing Services GSDP
The growth in the agriculture sector fell 2014-15 2015-16 2016-17
from -3.2% in 2014-15 -4.9% in 2016-17.
Note: Agriculture includes mining. Manufacturing includes construction and
▪ Per capita income: The per capita income
electricity. Services includes trade, transport, and financial services.
(at current prices) is estimated at Rs Sources: GSVA by Economic Activities, Central Statistics Office; PRS.
1,43,945 in 2016-17, a 5.8% increase over
the previous year.

Sanat Kanwar Gayatri Mann

March 14, 2018
[email protected] [email protected]
PRS Legislative Research  Institute for Policy Research Studies
3rd Floor, Gandharva Mahavidyalaya  212, Deen Dayal Upadhyaya Marg  New Delhi – 110002
Tel: (011) 43434035-36, 23234801-02  www.prsindia.org
 Himachal Pradesh Budget Analysis 2018-19 PRS Legislative Research

Budget Estimates for 2018-19

▪ The total expenditure in 2018-19 is targeted at Rs 41,440 crore. This is 6.3% higher than the revised
estimates of 2017-18. This expenditure is proposed to be met through receipts (other than borrowings) of
Rs 31,660 crore and borrowings of Rs 6,505 crore.
▪ In 2017-18, revised estimates of total expenditure were 9% higher (Rs 3,212 crore) than the budget
estimates.
▪ Total receipts for 2018-19 (other than borrowings) are expected to be 8.1% higher than the revised
estimates of 2017-18.
Table 1: Budget 2018-19 - Key figures (Rs crore)
% change % change
2016-17 2017-18 2017-18 from BE 2017- 2018-19 from RE
Items
Actuals Budgeted Revised 18 to RE of Budgeted 2017-18 to
2017-18 BE 2018-19

Total Expenditure 36,076 35,783 38,995 9.0% 41,440 6.3%

A. Borrowings* 8,603 6,146 6,377 3.8% 6,505 2.0%
B. Receipts (except
27,370 28,932 29,275 1.2% 31,660 8.1%
borrowings)
Total Receipts (A+B) 35,973 35,078 35,652 1.6% 38,165 7.0%
Revenue Deficit 920 -1,041 -2,627 152.3% -3,168 20.6%
As % of state GDP 0.7% -0.7% -1.9% - -1.7% -
Fiscal Deficit -5,869 -4,964 -7,472 50.5% -7,855 5.1%
As % of state GDP -4.7% -3.5% -5.5% - -5.2% -
Primary Deficit -2,510 -1,464 -3,655 -3,595 -1.6%
As % of state GDP -2.0% -1.0% -2.7% - -2.4% -
Notes: BE is Budget Estimate; RE is Revised Estimate. ‘-’ sign indicates deficit; ‘+’ indicates surplus.
Sources: Himachal Pradesh Budget Documents 2018-19; PRS.

Expenditure in 2018-19
▪ Capital expenditure for 2018-19 is proposed to be Rs 7,872 crore, which is a decrease of 5.7% over the
revised estimates of 2017-18. This includes expenditure which affects the assets and liabilities of the state,
and leads to creation of assets (such as bridges and hospital), and repayment of loans, among others.
▪ Revenue expenditure for 2018-19 is proposed to be Rs 33,568
crore, which is an increase of 9.5% over revised estimates of 2017- In 2018-19, the state aims to spend Rs 11,263
18. This expenditure includes payment of salaries, maintenance, crore on salaries and Rs 5,893 crore on providing
etc. Note that in 2017-18, Himachal Pradesh’s revenue pensions. Expenditure on both these heads
expenditure was 6.6% higher than its budget estimates, while the constitutes 41% of the revenue expenditure.
capital expenditure was 18% higher.
▪ In 2018-19, Himachal Pradesh is expected to spend Rs 7,444 crore on servicing its debt (i.e., Rs 3,184 crore
on repaying loans, and Rs 4,260 crore on interest payments). This is 11.6% higher than the revised
estimates of 2017-18.
Table 2: Expenditure budget 2017-18 (Rs crore)
% change from % change from
2016-17 2017-18 2017-18 2018-19
Item BE 2017-18 to RE RE 2017-18 to BE
Actuals Budgeted Revised Budgeted
2017-18 2018-19
Capital Expenditure 10,732 7,028 8,344 18.7% 7,872 -5.7%
Revenue Expenditure 25,344 28,755 30,651 6.6% 33,568 9.5%
Total Expenditure 36,076 35,783 38,995 9.0% 41,440 6.3%
A. Debt Repayment 3,943 3,105 3,500 12.7% 3,184 -9.0%
B. Interest Payments 3,359 3,500 3,817 9.1% 4,260 11.6%
Debt Servicing (A+B) 7,302 6,605 7,317 10.8% 7,444 1.7%
Note: Capital expenditure includes: (i) spending that creates assets, (ii) repayments on the loans taken by the government, and (iii) loans
provided by the government. Fiscal Deficit calculated based on total expenditure less public debt and revenue receipts.
Source: Himachal Pradesh Budget Documents 2018-19; PRS.

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 Himachal Pradesh Budget Analysis 2018-19 PRS Legislative Research

Sector expenditure in 2018-19

The departments listed below account for 54.3% of the total budgeted expenditure of Himachal Pradesh in
2018-19. A comparison of Himachal Pradesh’s expenditure on key sectors with 18 other states can be found in
the Annexure.
Table 3: Department-wise expenditure for Himachal Pradesh Budget 2018-19 (Rs crore)
% change from
2016-17 2017-18 2017-18 2018-19
Department RE 2017-18 to Budget provisions for 2018-19
Actuals Budgeted Revised Budgeted
BE 2018-19
▪ In order to improve quality of education, the
Education 4,514 5,453 5,827 6,230 6.9% government will establish 36 language labs in
schools.
▪ Himachal Road Improvement Scheme
launched with an outlay of 50 crore for cross
drainage.
▪ Increasing the target of tarring of existing
Public Works 7.9%
3,894 3,901 4,192 4,524 state roads from 1,785 km to 2,500 km for the
year 2018-19.
▪ Rs 100 crore allocated for maintenance of
roads.
▪ Jal Se Krishi Ko Bal scheme launched with
an outlay of Rs 250 crore for five years.
▪ Two new schemes: (i) Flow Irrigation Scheme
Irrigation 2,996 2,750 3,006 3,090 2.8% with an outlay of Rs 150 for five years, and
(ii) Solar Irrigation Scheme with an outlay of
Rs 200 crore for five years have been
launched.
▪ Medical emergency assistance under the
Health and Himachal Pradesh Patrakar Yojana increased
1,580 1,669 1,957 2,181 11.5%
Family Welfare from the Rs 50,000 to Rs 2,50,000, removing
the annual income limit
▪ The amount will be spent on irrigation,
Tribal horticulture, roads, education, health, and
1,108 1,440 1,432 1,620 13.1%
Development drinking water supply etc.

▪ Number of employment days provided under

Rural MNREGA to be increased from 100 to 120.
1,101 1,296 1,326 1,570 18.4%
Development

▪ Three new all women police stations to be set

Police 1,098 1,157 1,249 1,377 10.2% up in Solan, Hamirpur, and Chamba Districts
in 2018-19.
▪ 182 MW capacity from Hydro Electric projects
Power 3,979 909 1,142 946 -17.1% will be added in 2018-19.

Social Justice ▪ Budget provision of Rs 600 crore for a social

and 668 739 845 944 12.3% security pension scheme.
Empowerment

% of total
58.0% 54.0% 53.8% 54.3%
expenditure

Note: All amounts are net numbers.

Source: Himachal Pradesh Budget Documents 2018-19; PRS.

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 Himachal Pradesh Budget Analysis 2018-19 PRS Legislative Research

Receipts in 2018-19
▪ The total revenue receipts for 2018-19 are estimated
Himachal Pradesh witnessed a 7% fall in tax revenue
to be Rs 30,400 crore, an increase of 8.5% over the
collections during 2017-18 over the budget estimates. In
revised estimates of 2017-18. Of this, Rs 10,229 crore 2018-19, tax revenue is estimated to grow by 12% over
(33.6% of the revenue receipts) will be raised by the the revised estimates of 2017-18.
state through its own resources, and Rs 20,171 crore
(66.4% of the revenue receipts) will be devolved by the centre in the form of grants and the state’s share in
taxes.
▪ Non-Tax Revenue: Himachal Pradesh has estimated to generate Rs 1,981 crore through non-tax sources in
2018-19.
Table 4: Break up of state government receipts (Rs crore)
% change from % change from
2016-2017 2017-2018 2017-18 2018-2019
Item BE 2017-18 to RE RE 2017-18 to BE
Actuals Budgeted Revised Budgeted
2017-18 2018-19
State's Own Tax 7,042 7,946 7,379 -7.1% 8,248 11.8%
State's Own Non-Tax 1,717 1,602 2,142 33.7% 1,981 -7.5%
Share in Central Taxes 4,341 4,819 4,801 -0.4% 6,387 33.0%
Grants-in-aid from Centre 13,164 13,347 13,702 2.7% 13,784 0.6%
Total Revenue Receipts 26,264 27,714 28,024 1.1% 30,400 8.5%
Borrowings 8,603 6,146 6,377 3.8% 6,505 2.0%
Other receipts 1105.62 1218.59 1251.2 2.7% 1259.55 0.7%
Total Capital Receipts 9,709 7,364 7,628 3.6% 7,765 1.8%
Total Receipts 35,973 35,078 35,652 1.6% 38,165 7.0%
Sources: Himachal Pradesh Budget Documents 2018-19; PRS.

▪ Tax Revenue: Total own tax revenue of Himachal Pradesh is estimated to be Rs 8,248 crore in 2018-19.
The composition of the state’s tax revenue is shown in Figure 2. The tax to GSDP ratio is targeted at 5.4%
in 2018-19, which is equal to the revised estimate in 2017-18.
Figure 2: Composition of Tax Revenue in 2018-19 (BE)
▪ State GST is expected to be the largest
Vehicles, Stamps and component of Chhattisgarh’s own tax
3.6% Registration , 3.3% revenue in 2018-19. State GST is
Electricity ,
4.2% expected to generate Rs 4,064 crore.
The transfer-in from IGST is expected to
Others, 6.3% be Rs 170 crore.
▪ State excise is the second largest
component of tax revenue of the state. It
is expected to generate Rs 1,426 crore in
2018-19. This is an increase of 12%
Sales Tax, from the revised estimates of 2017-18.
16.0%
▪ Further, the government is expected to
generate Rs 1,320 crore through taxes on
State GST, sales and trade. This is a decrease of
49.3%
50% over the revised estimates of 2017-
State Excise, 17.3%
18.
▪ Electricity will contribute Rs 350 crore,
which is equal to the revised estimates of
2017-18. About 4.2% of the tax revenue
Sources: Himachal Pradesh Budget Documents 2018-19; PRS. will be generated through levy of
electricity tax. Land revenue will
account to 0.3% of the total tax revenue.

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 Himachal Pradesh Budget Analysis 2018-19 PRS Legislative Research

Deficits, Debts and FRBM Targets for 2018-19

The Himachal Pradesh Fiscal Responsibility and Budget Management (FRBM) Act, 2005 provides annual targets to
progressively reduce the outstanding liabilities, revenue deficit and fiscal deficit of the state government.
Revenue deficit: It is the excess of revenue expenditure over revenue receipts. A revenue deficit implies that the
government needs to borrow in order to finance its expenses which do not create capital assets.
The budget estimates a revenue deficit of Rs 3,168 crore (2.1% of GSDP) in 2018-19. This implies that revenue
receipts are expected to be lower than the revenue expenditure, resulting in a deficit. The 14th Finance Commission
had recommended that states should eliminate revenue deficits. The estimates in the Himachal Pradesh Budget
2018-19 suggest that the state is not expected to meet this target of eliminating revenue deficit.
Fiscal deficit: It is the excess of total expenditure over total receipts. This gap is filled by borrowings by the
government, and leads to an increase in total liabilities. In 2018-19, fiscal deficit is estimated to be Rs 7,855 crore,
which is 5.2% of the GSDP. The estimate exceeds the 3% limit prescribed by the 14th Finance Commission. While
setting the 3% target, the Finance Commission has recommended that this limit may be relaxed to a maximum of
3.5%, if states are able to contain their debt and interest payments to certain specified levels.
Table 5: Budget targets for deficits for Himachal Pradesh in 2018-19 (% of GSDP)
Revenue Fiscal
Year
Deficit (-)/Surplus (+) Deficit (-)/Surplus (+)
2016-17 -0.7% -4.7%
BE 2016-17 -0.7% -3.5%
RE 2017-18 -1.9% -5.5%
BE 2018-19 -2.1% -5.2%
Note: Fiscal Deficit calculated based on total expenditure less public debt and revenue receipts. The Statement of Fiscal Policy did not
provide targets for revenue surplus and fiscal deficit.
Sources: Himachal Pradesh Budget Documents 2018-19; PRS.

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 Himachal Pradesh Budget Analysis 2018-19 PRS Legislative Research

Annexure
The graphs below compare Himachal Pradesh’s expenditure on four key sectors as a proportion of its total
budget, with 18 other states.1
▪ Education: Himachal Pradesh has allocated 17.6% on education in 2018-19. This is higher than the
average expenditure allocated to education by 18 other states (using 2017-18 BE).
▪ Health: Himachal Pradesh has allocated 6.2% of its total expenditure on health, which is higher than the
average expenditure of 18 other states.
▪ Agriculture and allied activities: The state has allocated 6.2% of its total budget on agriculture and allied
activities. This is marginally lower than the allocations of 18 other states (6.4%).
▪ Rural development: Himachal Pradesh has allocated 4.4% of its expenditure on rural development. This
is lower than the average (5.6%) of the 18 other states.

Spending on education as a % of total budget Spending on health as a % of total budget

20% 18.0% 17.7% 17.6% 7% 6.2%
16.1% 5.9%
14.5% 5.5%
5.0% 4.8%

10% 4%

0% 0%
2016-17 2017-18 2017-18 2018-19 Average 2016-17 2017-18 2017-18 2018-19 Average
(BE) (RE) (BE) of 19 (BE) (RE) (BE) of 19
states states
(2017-18 (2017-18
BE) BE)

Spending on agriculture as a % of total budget Spending on rural development as a % of

total budget
7% 6.2% 6.4%
6.0% 5.8% 5.6%
6%
4.9%
4.3% 4.4%
3.9%
3.3%
4%
3%

0% 0%
2016-17 2017-18 2017-18 2018-19 Average 2016-17 2017-18 2017-18 2018-19 Average
(BE) (RE) (BE) of 19 (BE) (RE) (BE) of 19
states states
(2017-18 (2017-18
BE) BE)

Note: 2017-18 (BE), 2017-18 (RE), and 2018-19 (BE) figures are for the state of Himachal Pradesh.
Source: Annual Financial Statement, Himachal Pradesh Budget Documents 2018-19, various state budgets; PRS.

1
The 18 states apart from Himachal Pradesh are: Andhra Pradesh, Assam, Bihar, Delhi, Gujarat, Haryana, Jammu and Kashmir, Karnataka,
Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh, and West Bengal.
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