After swearing-in, Mamata starts new term under huge debt

KOLKATA: A Rs 1,000 note, the largest denomination issued by India, is 17.7 cm long. You will need 3.05 billion such notes to pay off the total debt of the West Bengal government. If one puts those many bank notes end to end, it can reach the moon from the earth and return 40% of the distance.

The length of the notes can also go round the earth’s equator more than 13 times. As Mamata Banerjee starts a new term as CM, the enormity of the debt will keep gnawing in her mind.

She also has a few other things such as attracting investments and tackling law and order situation on her agenda, but nothing will be a bigger constraint than the fiscal problem. The debt obligations will consume 77% of a government’s own tax revenue, or worse, that the amount it spends on debt repayment will be 3.5 times what it spends on building income-generating assets such as roads, power plants, canals, transport systems, etc. But that’s precisely what happened in Bengal in 2015-16.

Banerjee’s brand of politics thrives on loosening the purse strings. In the first term, she tossed criticisms out of the window to spend on grants to neighbourhood clubs, fares concerning almost everything under the sun. She also spent a lot on roads, electricity and water supply. They have paid off well, and it is quite unlikely that the CM will abandon the formula. This is where the debt repayments will hurt.

The debt can come in the way of building more hospitals and schools, and appointing doctors and teachers in those already built. It will halt building roads, digging of tubewells and providing assistance to farmers, sections close to the CM’s heart. The government paid Rs 33,067 crore towards clearing the debt last year which stood at Rs 3.05 lakh crore.

Experts warn that the crisis will reach a crescendo before the current term of the government ends in 2021 as the market borrowings, typically 10-year loans, will mature for payment of the principal amount.

For the first three years after taking over, the CM met all those who mattered at the Centre to extract a fiscal relief package. After the change of guard at the Centre, Banerjee renewed her quest for fiscal breather, but so far the search has been fruitless.

Critics have pointed out that in her second term, she cannot just go on pointing fingers at the Left for the fiscal mess. According to the budget estimates presented to the assembly by Amit Mitra, the debt will stand at Rs 3.34 lakh crore at the end of this fiscal, which means in six years, the TMC government’s contribution to the debt figure is about Rs 1.34 lakh crore. (It was about Rs 2 lakh crore in March 2011, when the Left went out.)