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Tough decisions, astute planning bring Madhya Pradesh out of cash crisis

The Madhya Pradesh government is poised to embark on a major capital expenditure plan in the current financial year, especially in the infrastructure sector.

The state government has decided to invest in irrigation and road sectors through the budgetary framework, official sources said.

"The fresh investment in the irrigation and road sectors was possible as the government cleared all central government dues within the stipulated time period," the sources added.

The state, which was suffering severe financial crisis at the beginning of 1999 with its expenditure far exceeding its revenues, witnessed virtual collapse of financial management in 1999-2000.

During the financial year, the state was in ways and means for more than 165 days and in overdraft for 101 days.

The state was able to turn-around the financial management following fiscal prudence, medium term strategic planning and increased access to international aid and domestic market borrowing.

The state had also achieved rapid fiscal correction in the current financial year as it has not been in overdraft for a single day and in fact had treasury bills of Rs 4.52 billion as on May 15, 2000. As a result, the state government was able to make advance payments of central loans during the current financial year to the tune of Rs 5.03 billion.

Listing four major reasons for the fiscal turn-around in Madhya Pradesh, officials said, "The state government had taken effective economy measures by reducing expenditure, evolving a medium term budgetary framework with focus on reduction revenue deficit, increase in resources and implementation of hard decisions."

"The political will displayed by the state leadership in pursuing austerity and economy measures and in resisting pressures for meaningless transfer has been one of the major factors in rapid fiscal correction," sources noted. Strict action against defaulting officers on the question of economy, wrongful appointments, budgetary controls, has had a singling effect on all government servants and on the public at large.

The most important factor that brought about quick fiscal correction in Madhya Pradesh was the ability of the government to take hard decisions and to stick by them despite pressures.

The daily wage workers dispute has been handled with determination. All departments have been made responsible for their programmes within sanctioned budgets. Ad-hoc requests of most departments for increase in budgetary allocations have been turned down.

New items of expenditure are now confined to important items and, the budget of 2000-2001 is the first without any major items of expenditure.

Utilisation of assistance under the externally aided projects is being optimised so as to maximise the loan share and minimise wastage of scarce state resources on these schemes.

UNI

Business

Madhya Pradesh