Madhya Pradesh Budget Analysis 2017-18

The Madhya Pradesh Finance Minister, Mr. Jayant Mallayya, presented the Budget for Madhya Pradesh for the
financial year 2017-18 on March 1, 2017.
Budget Highlights
 The Gross State Domestic Product of Madhya Pradesh at current prices for 2017-18 is estimated to be Rs.
7,35,246 crore. This is 13.9% higher than the revised estimate for 2016-17.
 Total expenditure for 2017-18 is estimated to be Rs 1,69,954 crore, an 8.5% increase over the revised estimate
of 2016-17. The revised estimate for 2016-17 is Rs 2,083 crore lower than the budgeted target.
 Total receipts (excluding borrowings) for 2017-18 are estimated to be 11.4% higher, at Rs 1,45,111
crore. In 2016-17, they fell short of the budgeted target by Rs 4,111 crore.
 Revenue surplus for the next financial year is targeted at Rs 4,596 crore, or 0.63% of the Gross State Domestic
Product (GSDP). Fiscal deficit is targeted at Rs 25,689 crore (3.49% of GSDP). The Fiscal Responsibility and
Budget Management Act, 2005 mandates a fiscal deficit ceiling of 3.5% of GSDP. Primary deficit is targeted
at Rs 14,148 crore (1.9% of GSDP).
 Rs 33,564 crore has been allocated for the Agriculture Budget in 2017-18. Rs 400 crore has been allocated to
the Rashtriya Krishi Vikas Yojana, and Rs 305 crore has been allocated to the National Food Security Mission.
 Allocations to the departments of Urban Administration and Development, School Education and Rural
Development increased by 22%, 10% and 7% respectively, over the revised estimates of 2016-17. However,
allocation to the Department of Energy has decreased by 21%.
Policy Highlights
 Irrigation: Rs 9,850 crore is proposed to be spent as capital expenses for irrigation schemes. In addition, Rs
140 crore has been allocated for micro-irrigation.
 Education: 36,000 new teachers are proposed to be recruited; 520 high schools and 240 higher secondary
schools are proposed to be upgraded.
 Energy: Rs 4,622 crore is proposed to be spent on the UDAY scheme in 2017-18. In 2016-17, Rs 7,568 crore
was provided as assistance to power distribution companies under UDAY scheme.

Madhya Pradesh: State of Economy

Economy
25% 22.9% % growth over previous year
Between 2011-12 and 2015-16, the state’s
GSDP grew at an average annual rate of 7.5% 20%
(at constant prices). Over this period, per capita
income increased from Rs 43,082 to Rs 54,190, 15%
an average increase of 5.9%. 9.7%
8.7% 8.9%
10%
7.0%
In 2015-16, the state’s GDP grew at 8.7%, at 5.5% 7.2%
4.6% 5.3%
constant prices. The agriculture sector grew at 5%
2.2%
7.2% (at constant prices) as compared to 2014-
15, while the manufacturing sector grew at 7%. 0%
The services sector grew at 8.9%, compared to -0.1%
-1.1%
8.7% in 2014-15. The agriculture sector -5%
contributed to 34% of GSDP in 2015-16, while 2012-13 2013-14 2014-15 2015-16
the manufacturing and services sectors Agriculture Manufacturing Services
contributed to 22% and 38% of the GSDP
respectively. Source: Central Statistics Office.

Workforce Participation
Workforce Participation Rate is the proportion of workers or job seekers to its population. The Rate for Madhya
Pradesh (2015-16) was 44.8%, lower than 59.2% in 2013-14. Note that in 2015-16, the national average stood
at 50.5%.
Source: Lok Sabha Unstarred Question No. 682, Answered on February 6, 2017.

Tanvi Deshpande
March 6, 2017
[email protected]
Madhya Pradesh Budget Analysis 2017-18 PRS Legislative Research

Budget Estimates for 2017-18

 The total expenditure in 2017-18 is targeted at Rs 1,69,954 crore. The expenditure in 2016-17 was Rs
1,56,630 crore, which is 1% (or Rs 2,083 crore) less than the budgeted target.
 The expenditure in 2017-18 is proposed to be met through receipts (other than borrowings) of Rs 1,45,111
crore and borrowings of Rs 24,392 crore. Total receipts for 2017-18 (other than borrowings) are expected
to be 11% more than the revised estimate of 2016-17.
Table 1: Budget 2017-18 - key figures (in Rs crore)
% change from % change from
2015-16 2016-17 2016-17 2017-18
Items RE to BE of RE 2016-17 to
Account Budgeted Revised Budgeted
2016-17 BE 2017-18
Total Expenditure 1,19,766 1,58,713 1,56,630 -1.3% 1,69,954 8.5%
A. Borrowings (net) 15,125 24,175 25,635 6.0% 24,392 -4.9%
B. Receipts (except borrowings) 1,05,451 1,34,419 1,30,308 -3.1% 1,45,111 11.4%
Total Receipts (A+B) 1,20,576 1,58,594 1,55,944 -1.7% 1,69,503 8.7%
Revenue Deficit
5,740 3,510 1,535 4,596
(-)/Surplus(+)
As % of state GDP 1.02% 0.49% 0.24% 0.63%
Fiscal Deficit
-14,065 -24,914 -29,899 -25,689
(-)/Surplus(+)
As % of state GDP -2.49% -3.49% -4.63% -3.49%
Primary Deficit
-5,974 -14,680 -19,962 -14,148
(-)/Surplus(+)
As % of state GDP -1.06% -2.06% -3.09% -1.92%
Notes: BE is Budget Estimate; RE is Revised Estimate; Borrowings are net of receipts. GSDP for 2017-18 is taken from Budget at a glance,
as Rs 7,35,246 crore, at current prices.
Sources: State Budget Documents; PRS.

Expenditure in 2017-18
 Government expenditures can be divided into (a) revenue expenditure, such as payment of salaries, and (b)
capital outlay, which affects the assets and liabilities of the state.
 Total revenue expenditure for 2017-18 is proposed to be Rs 1,34,519 crore, which is an increase of 8% over
revised estimates of 2016-17. Total capital outlay is proposed to increase by 10.3% to Rs 35,435 crore from
the revised estimates of 2016-17. This includes creation of assets, repayment of loans, etc.
Table 2: Expenditure budget 2017-18 (in Rs crore)
2015-16 2016-17 2016-17 2017-18 % change from RE 2016-17
Item
Account Budgeted Revised Budgeted to BE 2017-18
Revenue Expenditure 99,771 1,22,585 1,24,516 1,34,519 8.0%
Capital Outlay 19,995 36,128 32,114 35,435 10.3%
Total Expenditure 1,19,766 1,58,713 1,56,630 1,69,954 8.5%
A. Interest Payments 8,091 10,233 9,937 11,541 16.1%
B. Loan repayment 4,860 9,105 4,899 9,546 94.8%
Debt servicing (A+B) 12,951 19,338 14,836 21,087 42.1%
Notes: BE is Budget Estimate and RE is Revised Estimate.
Sources: State Budget Documents; PRS.

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Madhya Pradesh Budget Analysis 2017-18 PRS Legislative Research

Department expenditure in 2017-18

 The departments listed below account for 42% of the budgeted expenditure of Madhya Pradesh in 2017-18.
Table 3: Department-wise expenditure for Madhya Pradesh Budget 2017-18 (in Rs crore)
% change from
2016-17 2017-18
Department RE 2016-17 to Budget proposals for 2017-18
Revised Budgeted
BE 2017-18
 A provision of Rs 214 crore has been allocated for the construction
of school buildings. Rs 92 crore has been allocated for the purchase
of NCERT books.
School Education 18,094 19,873 9.8%  A provision of Rs 48 crore has been made for the establishment,
management and security of girls’ hostels.
 Rs 703 crore for ST students, Rs 740 crore for SC students and Rs
850 crore for OBC students as scholarships/stipends.
 This allocation includes Rs 4,622 crore under the UDAY scheme.
Energy 21,183 16,802 -20.7%  A scheme of Rs 4,200 crore is proposed to convert temporary
connections into permanent connections. 
 Rs 2,000 crore has been made to the Mahatma Gandhi National
Rural Employment Guarantee Scheme (MGNREGS).
Rural  Rs 2,850 crore has been allocated to the Pradhan Mantri Gram
13,480 14,388 6.7% Sadak Yojana (PMGSY).
Development
 Rs 1,127 crore has been allocated for the provision of basic
amenities to Panchayats. 
 A provision of Rs 600 crore has been made for the Swatchh Bharat
Urban Abhiyan.
Development and 9,394 11,489 22.3%  Rs 700 crore has been allocated for AMRUT Yojana, and Rs 700
Environment crore has been allocated for the Smart Cities Mission; Sagar and
Satna city are proposed to be included in phase two. 

 Rs 5,966 crore has been allocated for the construction of roads and
Public Works 7,296 8,576 17.6%
bridges.

Expenditure of
69,447 71,127 2.4% 
departments

Total expenditure 1,56,630 1,69,954 7.1% 

% of total
44.3% 42%
expenditure
Other
87,183 98,827 11.4%
Departments
Sources: Press note on Madhya Pradesh State Budget 2017-18; PRS.

Other announcements:
 Police force: Rs 5,850 crore has been allocated to the police force. Rs 402 crore has been allocated for
construction works for police personnel, and Rs 98 crore has been allocated to purchase new arms and vehicles
for the police force.
 Skill Development: Rs 100 crore has been allocated under skill development scheme, for the ‘Mukhyamantri
Kaushal Samwardhan and Kaushalya Scheme’, to train 2.5 lakh youngsters and two lakh women.
 Scheduled Castes and Scheduled Tribes: Rs 25,862 crore has been allocated to the Scheduled Tribe sub-
scheme in 2017-18, and Rs 16,381 crore has been allocated to the Scheduled Castes sub-scheme.

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Madhya Pradesh Budget Analysis 2017-18 PRS Legislative Research

Receipts in 2017-18
 The total revenue receipts for 2017-18 are estimated to be Rs 1,39,116 crore. The tax to GSDP ratio is
targeted at 6.8% in 2017-18, same as 6.8% in the revised estimates of 2016-17.
 Tax revenue is expected to increase by 14% (or Rs 6,160 crore) in 2017-18 over the revised estimates of
2016-17. Non-tax revenue is estimated to increase by 12.2% (or Rs 1,270 crore) in 2017-18.
 Grants from the centre are set to increase by Rs 593 crore, to Rs 26,034 crore in 2017-18. The other
component of transfers from the centre, which is the state’s share in central taxes, is estimated to increase by
Rs 5,042 crore, to Rs 51,106 crore in 2017-18.
Table 4: Break up of state government receipts (in Rs crore)
2015-16 2016-17 2016-17 2017-18 % change from RE
Item
Account Budgeted Revised Budgeted 2016-17 to BE 2017-18
State's Own Tax 40,240 46,500 44,135 50,295 14.0%
State's Own Non Tax 8,569 11,482 10,410 11,680 12.2%
State's share in Central Taxes 38,371 43,676 46,064 51,106 11%
Grants-in-aid from Centre 18,330 24,437 25,441 26,034 2.3%
Total Revenue Receipts 1,05,511 1,26,095 1,26,051 1,39,116 10.4%
Recovery of Loans and Advances,
191 7,704 680 5,150 657.0%
and other capital receipts*
Borrowings (net) 15,125 24,175 25,635 24,392 -4.9%
Public Account Receipts -251 620 3,577 846 -76.4%
Total Capital Receipts 15,066 32,499 29,893 30,387 1.7%
Total Receipts 1,20,576 1,58,594 1,55,944 1,69,503 8.7%
Note: * includes recovery of debt of electricity distribution companies; this is being converted to equity and an equivalent amount is shown
as capital expenditure. BE is Budget Estimate and RE is Revised Estimate.
Sources: State Budget Documents; PRS.

 Total tax revenue of Madhya Pradesh is estimated to be Rs 50,295 crore in 2017-18. The composition of
the state’s tax revenue is shown in Figure 1.

Decrease in tax revenue collected in 2016-17

In 2016-17, the revised estimate of Madhya Pradesh’s tax revenue fell short of the budgeted estimate by Rs 2,365 crore (5.1%). This is
mainly owing to a decrease in state excise duties collected from the licensing fees of domestic and imported liquor stores (Rs 1,300 crore
decrease), and revenues from stamp duty and registration charges (Rs 600 crore decrease) and vehicle tax (Rs 300 crore decrease).

Figure 1: Composition of Tax Revenue in 2017-18 (BE)  Tax Revenue: Among all sources of
Others, 12% Tax revenue, sales tax is the largest
component. Sales tax is levied on the
Electricity
tax, 6%
sale of goods in the state is expected
Sales tax, to generate Rs 25,910 crore (52% of
Vehicle tax, 5% 52% tax revenue).
 The state is expected to generate Rs
Stamp duty 8,600 crore (17%) through levy of
and state excise duty on the production of
registration,
9% various forms of alcohol.
 In addition, revenue will be generated
through stamp duties, registration
State excise charges on real estate transactions,
duty, 17% electricity duties, among others.

 Non Tax Revenue: Madhya Pradesh has budgeted to generate Rs 11,680 crore through non-tax sources.
 In 2016-17, the state expected to generate a revenue of Rs 4,143 crore from education (such as licensing
fees); however, the revised estimate is Rs 1,038 crore lower than the budgeted estimate. In 2017-18, Rs
3,310 crore is estimated to be generated from education.
 Rs 3,700 crore is estimated to be generated from mining in 2017-18, compared to Rs 3,100 crore as per the
revised estimate of 2016-17 (19% increase).

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Madhya Pradesh Budget Analysis 2017-18 PRS Legislative Research

Deficits, Debts and FRBM Targets for 2017-18

The Madhya Pradesh Fiscal Responsibility and Budget Management (FRBM) Act, 2005 provides annual targets to
progressively reduce the outstanding debt, 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
recurring receipts of the government are unable to cover its recurring expenditures. The revenue surplus is expected
at Rs 4,596 crore (or 0.63% of state GDP) in 2017-18. This is better than the target of eliminating revenue deficit
prescribed by the state’s FRBM Act and by the 14th Finance Commission.
Fiscal deficit: It is the excess of total expenditure over total UDAY Scheme
receipts. This gap is filled by borrowings by the The tripartite agreement in August 2016 under UDAY
government, and leads to an increase in total liabilities of the scheme, between the central government, state
government. In 2016-17, fiscal deficit increased from the government and the DISCOM provides takeover of 75%
budgeted target of Rs 24,914 crore to Rs 29,899 crore of the DISCOM’s debt by the state government. The
(4.63% of GSDP). This increase includes Rs 7,361 crore agreement provides for the conversion of loan to equity
in 2016-17 amounting to Rs 7,568 crore, and Rs 4,622
taken up as market borrowings on account of the UDAY crore per year as grants for the subsequent four years.
scheme. The revised estimate in 2016-17 exceeded the 3.0% The Madhya Pradesh government was also permitted to
limit under the 14th Finance Commission, and the 3.5% limit issue non-SLR bonds in 2016-17, which would not be
under the FRBM Act. In 2017-18, fiscal deficit is estimated counted for the purpose of fiscal deficit limits.
at Rs 25,689 crore (3.49% of GSDP). Accordingly, Rs 7,568 crore was provided in the
Outstanding Liabilities: It is the accumulation of budgeted estimate of 2016-17. However, only Rs 208
crore was raised through non-SLR bonds, and the
borrowings over the years. In 2017-18, the outstanding
remaining Rs 7,361 crore was funded through market
liabilities are expected at 24.9% of GSDP, an increase over borrowings. Further, instead of converting Rs 7,568
the 24.6% as per revised estimates of 2016-17. They are crore into equity in 2016-17, Rs 4,011 crore has been
estimated to further increase to 25.8% in 2018-19, 26.3% in provided as grants to DISCOMs, and Rs 3,557 crore has
2019-20, and 26.5% in 2020-21. An increase in liabilities been used to convert debt into equity. In 2017-18. Rs
over time indicates that the state would be required to pay 611 crore has been provided as grants, and Rs 4,011
more in terms of interest payments as well as principle crore has been used to convert debt into equity.
amount repayments over the coming years. Sources: Tripartite MoU; State Budget documents.
Table 5: Budget targets for deficits for the state of Madhya Pradesh (% of GSDP)
Year Revenue Surplus Fiscal Deficit Outstanding Liabilities
2015-16 1.02 -2.49 23.32
RE 2016-17 0.24 -4.63 24.63
BE 2017-18 0.63 -3.49 24.94
Target 2018-19 Surplus -3.49 25.79
Target 2019-20 Surplus -3.25 26.30
Target 2020-21 Surplus -3.00 26.51
Note: Figures as percentage of state GDP.
Sources: Press Note, Madhya Pradesh State Budget 2017-18; PRS.

Figures 2 and 3 show the trend in deficits and outstanding liabilities from 2014-15 to 2017-18:
Figure 2: Deficits (as % of state GDP) Figure 3:Outstanding Liabilities (as % of GSDP)
2% 1.23% 30%
1.02% 24.94%
0.63% 24.63%
1% 0.24% 25% 22.26% 23.30%
0%
20%
-1%
15%
-2%
-2.29% 10%
-3% -2.49%
-4% -3.49% 5%

-5% -4.63% 0%
2014-15 2015-16 2016-17 RE 2017-18 BE 2014-15 2015-16 2016-17 RE 2017-18 BE
Revenue Surplus (%) Fiscal Deficit (%) Outstanding Liabilites (%)
Sources: Madhya Pradesh State Budget Documents; PRS. Sources: Madhya Pradesh State Budget Documents; PRS.
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