The shortages of revenue earning compared to the committed expenditures create deficits in the yearly budget which increases the propensity to borrow or debt financing. Improper budget and planning, negligence and ignorance for creating additional sources of revenue have come to be the major reason behind these market borrowings and loans have been considered as one of the easiest, last and final options to fulfil the requirements for the yearly budget. As a result, the market borrowing and the cost of debt are rapidly increasing, and such a financial management disorder pushing the State toward bankruptcy.

Budget is one of the important functions of finance and the financial management process of the Government and non-Government organizations. Properly planned and effective budgets are very important for ensuring the development not only of any organization but also of the State Government. The main objectives of the study are enumerated as follows:-

i. To know the reason behind market borrowing in the budget of Tripura;

ii. To ascertain the tentative amount of total market borrowing of Tripura and its yearly growth;

iii. To analyse the justification for market borrowing in the budget of Tripura and its results;

This particular study on budget and finance, and the analysis of every parameter of the budget is focused on knowing about the actual financial condition and position of the State and searching the possibility to recover of the State Government of Tripura.

The preparation of a budget and its financial operation are very important functions of the management of any organization and institution. According to CAG[2], the effective management of budgeted funds ensures that decisions taken at the policy level are implemented successfully at the administrative level without wastage or diversion of funds (CAG) which has a significant impact not only assists in the proper management of funds but also ensures financial development of the States. In the process of budgetary management, budgetary controls are important in influencing performance, to enhance performance the organizations should develop a more formal practice in the development of budgetary controls (Chaudhary and Chaudhary) which also helps to ensure that approved and sanctioned funds would be utilised properly and effectively for development purpose. In the entire process of budgeting, actual budget preparation, co-ordination and implementation are almost exclusively the responsibilities of top-level management, but the heads of units and departments should be more involved in the preparation of budgets and not just the implementation (Isaac, Lawal and Okoli). However, the consequent lack of reliable and timely revenue and expenditure data for budget planning, monitoring, expenditure control, and reporting has negatively impacted budget management. The results have been a poorly controlled commitment of government resources, often resulting in a large build-up of arrears; excessive borrowing, pushing up interest rates and crowding out private sector investment; and misallocation of resources, undermining the effectiveness and efficiency of service delivery (Diamond and Khemani). There has been a marked deterioration in the fiscal health of all states in India since the early 1990s, which reached a peak in the mid-2000s in almost every state in India. While the fiscal health of the state governments has improved recently after a deterioration in the fiscal health of all states in India since the early 1990s to 2000s, the debt ratio and interest payments are still alarming and the primary causes for the growing debt ratio need to be analysed. The pattern of use of government borrowing is crucial as far as the sustainability of debt finance is concerned (Das). Public borrowing cannot be deserved to bring adequate resources in the absence of properly developed capital markets in underdeveloped economies. At the same time, public borrowing may raise interest rates and affect required investment adversely (Chakraborty). Since the impacts of excessive debt financing or market borrowing are showing its impact on the economy and financial performance of the State, financial controls are the most important for an objective measure of organizational or departmental performance. During strategic planning, management defined measurable objectives for operations (KT).

It is observed that the practice of off-budgeting has also been in so many States of India in the last few years, where the ideal regulatory framework for off-budget borrowing should incorporate with necessary required elements. It should require off-budget numbers to be added to the major fiscal indicators, while also requiring them to be disclosed separately. Union and state governments need to make full and accurate disclosures of their off-budget operations, as required under their FRLs (Gupta and James). The process of budgeting procedure in the development of any organization has to assume the development of a long-term financial plan containing an integrated plan of income and expenses, a cash flow plan, and a planned balance budget development of CFR[3] activities of the organization in general for the next year; forming of financial budgets for a month on CFR activities and the organization in general (T. M. Kovaleva, O. A. Khvostenko and A. G. Glukhova).

This study is descriptive and has been conducted on the yearly budget and its financial management by the State Government of Tripura for the period of last 06 (Six) years (from 2018-19 FY to 2023-2024 FY). This is a study based on secondary data supported by different sources of information which are collected through the review of different sources of information. These data are collected from the yearly budget and annual financial statement of the State Government of Tripura; different financial circulars and rules & regulations issued by the Ministry of Finance, Government of India; relevant books, journals, newspapers, and magazines, different e-sources and publications. For analysis of the study, descriptive statistical analysis like different measures of central tendencies and dispersions has been applied where required to explore the inherent characteristics of the data collected from the sources. Moreover, some of the popular graphs and charts are also used when necessary and an Inferential Analysis.

There are three (03) main sources of funds for the budget of the State which are (i) Receipts from the Union Government of India; (ii) State’s Own Sources and (iii) Market Borrowing & Loans. Almost all the components of receipts and expenditures are increased in the current year's budget, as the budget amount is increased than the last year. On the expenditure side, maximum increases of expenditure are found in the Salary & Wages (+15.17%) and negative growth of expenditure is in the Repayment of Loans (-5.98%), whereas on the receipt side, maximum growth is found in Market Loans and Other Borrowings (+46.78%) and negative growth in the Recovery and Loan and Advances (-4.08%). in compare to the 2022-23 FY.  The growth of total expenditure in the budget of 2023-24 FY is +₹2,485.34 crores or +9.87% in comparison to 2022-23 FY.

The Government of Tripura collects the market borrowing and loans from the NREC[4], NABARD[5], NCDC[6], NHAI[7] and different FIs[8] of the country including banks and insurance companies. There is no specific record of total market borrowing and loan till date in the yearly budget, annual financial statement, and in the website of the concerned department i.e. Finance Department, Government of Tripura.

The average rate of interest on loans of the State Government is @10% per annum whereas the minimum & maximum rate of interest on market borrowing and loans is @5.50% and @14.50% respectively. The Estimated Principal Amount of Loan before the budget of 2018-19 FY:

P = I / K_d

= ₹1,146.82 crores / @10%

= ₹11,468.20 crores

Where, P = Estimated Principal Amount of Loan before the budget of 2018-19 FY; I = Total interest paid in the year; and K_d = Average Rate of Interest on Loan;

Market Borrowing and Loan (d) for the budget of 2018-19 FY = ₹1,543.00 crores;

Repayment of Loan (R) in the budget of 2018-19 FY = ₹520.30 crores;

Therefore, Net Total Principal Loan Amount (D) of the State Government up to 2018-19 FY:

= (P + d – R)

= ₹11,468.20 crores (+) ₹1,543.00 crores (-) ₹520.30 crore;

= ₹12,490.70 crores;

Based on the Net Total Principal Loan amount (D) of 2018-19 FY, Estimated Total Principal Loan Amount (P), Interest Paid in the Year (I) and Repayment of Loan in the Year (R) up to 2023-24 FY have been calculated in Table-01.

The Total Interest Paid (∑I), Total Market Borrowing & Loan (∑d), and Total Repayment of Loan (∑R) of the State Government from 2018-19 FY to 2023-24 FY is ₹7,519.45 crores, ₹15,043.58 crores, and ₹4,715.82 crores respectively. From inception, the Net Total Principal Loan Amount (D) of the State up to 2023-24 FY is ₹21,795.96 crores (Table-01).

The average of the estimated interest rate of loan per year (∑I_r/∑n) based on the % of Interest Paid in the Year (I) on the Estimated Principal Loan Amount (P) is +8.25%; the average of the growth rate of yearly market loans (∑d_r/∑n) based on the % of Market Loan in the Year (d) on the Estimated Principal Loan Amount (P) is +16.40%; and the average of the repayment of loan percentage (∑R_r/∑n) based on the % of Repayment of Loan (R) on the Estimated Principal Loan Amount (P) is +5.08% (Table-02).

Based on the average of the estimated interest rate of a loan per year (∑I_r/∑n), the average of the growth rate of yearly market loans (∑d_r/∑n) and the average of the repayment of loan percentage (∑R_r/∑n) which are calculated in Table-02, the estimated Market Borrowings & Loan (d_e), Yearly Repayment of Loan (R_e), and Interest Payable in the Year (I_e) are also calculated for the year from 2024-25 FY to 2027-28 FY in Table-03, where the Net Total Principal Loan Amount (D) of 2023-24 FY ₹21795.96 is considered the Estimated Principal Loan Amount (P_e) of 2024-25 FY.

As per calculation in Table-03 above, in the next four (04) years from 2024-25 FY to 2027-28 FY the Total Market Borrowing & Loans (∑d_e) would be ₹17,054.07 crores; the Total Interest Payable (∑I_e) would be ₹8,579.04 crores; the Total Repayment of Loan (∑R_e) would be ₹5,282.60; and the Total Principal Loan Amount  up to 2027-28 FY would be ₹33,747.43 crores.

The overall process of budgeting from the budget estimates to the final/ actual position of the budget goes through three (03) different stages i.e. Budget Estimate, Revised Estimates and Actual Budget and takes three (03) years period. Because of changes in the budget position, the position of every component or element of the budget i.e. receipts/ sources and payments/ expenditures are also changed. For example, the estimated budget for 2018-19 FY is finalized in 2020-21 FY and for 2019-20 FY it is finalized in 2021-22 FY and so on. Accordingly, for the period of this study from 2018-19 FY to 2023-24 FY final position/ actual budget is accounted up to the budget of 2021-22 FY only (Table-04).

From the analysis in Table-04, it comes to know that the total estimated budget amount from 2018-19 FY to 2021-22 FY ₹75,248.93 crores has changed and decreased consecutively up to an actual budget of ₹65,453.28 crores. The budget amount decreased by -₹9,795.65 crores in the four (04) years, whereas in that period the changes in market borrowing and loans in Budget Estimates, Revised Estimates and Actual Budget positions are ₹9,562.98 crores, ₹9,782.78 crores and ₹7,814.87 crores respectively.

The changes in three basic components of loans such as Market Borrowing and Other Loans, Repayment of Loan and Interest Payment in the three (03) budget positions namely Budget Estimates, Revised Estimates and Actuals are not similar in the financial year from 2018-19 FY to 2021-22 FY (Table-05). The amount of changes and differences in the loan components is analyzed by comparing as per budget position. As per the total in the budget position from 2018-19 FY to 2021-22 FY, the changes in loan components are as follows:-

The analysis in Table-05 below shows that high or maximum focuses are given in the process of revised estimates of market borrowing in comparison to budget estimates and the actual position of the budget, whereas the estimation of repayment of loan and interest payment is lowest and minimum in compare to revised estimates and actual budget position.

Again, the changes in revenue earnings/ income as well as capital expenditure changes as per above mentioned three (03) budget positions are not similar in the last financial year from 2018-19 FY to 2021-22 FY (Table-06). The differences in changes in revenue and capital expenditure are analyzed as per changes in budget positions.

As per the budget position from 2018-19 FY to 2021-22 FY changes in Revenue Earnings/ Income and Capital Expenditure are as follows:-

Where, BE= Budget Estimates; RE= Revised Estimates and AB= Actual Budget;

The analysis in Table-06 below shows that high and maximum focus is given in the process of estimation of capital expenditure and earnings of revenue in comparison to its revised estimates and actual budget by the State Government, where the number of budget estimates is highest in comparison to revised estimates and actuals.

There are fiscal and primary deficits in the actual position of the budget from 2018-19 FY to 2021-22 FY an amount of -₹5,397.93 crores and -₹571.03 crores respectively (Table-07). The total of both actual deficit amounts is less than the total actual market borrowing and loan of the State Government of ₹7,814.87 crores for that particular period.

The probable estimated increases in financial condition and financial liabilities of the State up to 2027-28 FY are prepared in Table-08 below;

Table-08: Probable Increases of Financial Liabilities of the State up to 2027-28 FY

Source: Author’s Analysis as per the Budget of the Finance Department, Govt. of Tripura

Debt financing and debt capital budgeting are very important and significant when the source of funds especially sources of revenue generation are scares and shortages in revenue collection. But, when any organization and its financial management are focused and depending on such a loan or debt capital borrowings only in an excessive manner then such practice surely provides negative and unexpected results. The impacts of such a financial condition would be far-reaching in the process of development of that organization. In the process of budget preparation and budgetary control, excessive and unjustified market borrowing is required to be verified and analyzed in time for the corrective measure, so that not only the State can get relief from any probable financial debacle in the future but also the proper financial and overall development of the State could be ensured as per the vision and mission of the Government.

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