Meghalaya clarifies CAG report: State on track for $10 billion economy target

Syllad | The Rising MeghalayaSeptember 3, 2024

Recent media reports, based on the Comptroller and Auditor General (CAG) findings, raised concerns about Meghalaya’s 10 billion USD economy dream, citing various fiscal parameters. The report highlighted that Meghalaya’s Gross State Domestic Product (GSDP) growth in 2021-22 and 2022-23 lagged behind the national GDP growth rates of 18.36% and 16.06%, respectively.

Additionally, the fiscal deficit rose from 5.71% in 2021-22 to 6.55% in 2022-23, exceeding the target of 4% set under the Meghalaya Budget Management & Responsibility (Amendment) Act 2022. The outstanding Debt-GSDP ratio stood at 43.19% in 2022-23, falling short of the Meghalaya FRBM Act target of 28%.

The Finance Department has issued a clarification, stating that India’s accounting system is complex, and challenges arise due to frequent data revisions by the Centre and varying methodologies in calculating fiscal parameters.

Correcting GSDP Growth Rates

The Finance Department pointed out that the CAG’s report on GSDP figures was finalized before the Ministry of Statistics and Programme Implementation (MoSPI) released updated figures in August 2024. According to MoSPI, Meghalaya’s GSDP numbers are significantly higher: Rs 40,222 crore in 2021-22 and Rs 46,551 crore in 2022-23, compared to the CAG’s earlier figures of Rs 38,785 crore and Rs 42,697 crore, respectively.

With the revised MoSPI data, Meghalaya’s economic growth shows a remarkable 17.4% Compound Annual Growth Rate (CAGR) from FY 2020-21 to FY 2022-23, positioning the state well on its path to achieving its $10 billion economy target by 2027-28.

Special Capital Assistance Misrepresented in Fiscal Deficit Calculations

The Finance Department also addressed the impact of the ‘Special Capital Assistance to States for Capital Investment’ (SASCI/CAPEX) launched post-COVID by the Government of India. The assistance, provided as a 50-year interest-free loan, is treated as part of the state’s fiscal calculations, though it resembles a grant more than traditional debt. Adjusting for this, the state’s fiscal deficit for 2022-23 is recalculated at 3.75%, comfortably within the 4% target set by the Government of India, contrary to the CAG’s reported 6.55%.

Debt-GSDP Ratio Adjusted Following Corrections

The department also corrected the Debt-GSDP ratio, stating that after revising GSDP figures and excluding the capital assistance, the ratio stands at 36.3% for 2022-23, lower than the CAG’s reported 43.19%. The Finance Department stressed that borrowing has been strategically used for critical infrastructure investments, with capital expenditure nearly doubling from Rs 1,903 crore in 2018-19 to Rs 3,362 crore in 2022-23.

Dr. Vijay Kumar D, Commissioner & Secretary, Finance, Government of Meghalaya, stated, “India’s accounting system is complex, and there are challenges due to frequent revisions by the Centre. The corrections provide a realistic picture of the state’s fiscal health, showing that Meghalaya remains on a sustainable debt path while targeting a $10 billion economy.”