Government, RBI, FC should work together to enforce fiscal discipline in states: NCAER
1 month, 2 weeks ago

Government, RBI, FC should work together to enforce fiscal discipline in states: NCAER

The Hindu  

The Union Government, RBI and Finance Commission should work together to enforce fiscal discipline in states, a research paper by the National Council of Applied Economic Research said. The paper titled ‘The State of the States: Federal Finance in India’ further said heavily indebted states could be given some debt relief in return for conceding the Central Government oversight. The paper also pointed out that the horizontal devolution of taxes among states, awarded by the Finance Commission every five years, does not provide incentives for fiscal rectitude. The paper also suggested that there may be room for a fiscal “grand bargain,” where heavily indebted states with the worst prospects receive a modicum of debt relief in return for their conceding additional central government oversight and even a loss of fiscal autonomy.

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History of this topic

Equity, discipline must guide states’ fiscal behaviour
1 week, 1 day ago

Equity, discipline must guide states’ fiscal behaviour

Hindustan Times  

On Monday, Telangana chief minister Revanth Reddy expressed his government’s inability to pay dearness allowance to government employees because of the precarious fiscal situation of the state. In some states, governments are diverting funds from more important heads including capital spending to accommodate populist schemes even as the fiscal situation remains under control. Because states spend more than the Centre, …

Former RBI governor calls for greater Centre-State cooperation in fiscal federalism
1 month, 3 weeks ago

Former RBI governor calls for greater Centre-State cooperation in fiscal federalism

The Hindu  

Former Reserve Bank of India Governor Duvvuri Subbarao underscored the need for a cooperative approach to India’s fiscal federalism in his BPR Vithal Memorial Lecture at the Centre for Economics and Social Studies in Hyderabad on Thursday. Speaking on ‘India’s Fiscal Federalism – Quo Vadis?’ Subbarao traced the evolution of Centre-State financial relations and highlighted the need for a more …

From Fragile Five to First Five: India's journey of fiscal consolidation
2 months ago

From Fragile Five to First Five: India's journey of fiscal consolidation

Live Mint  

Fiscal discipline is a cornerstone of economic stability for any country, and India is no exception. In an era of escalating geopolitical uncertainties and changing trade dynamics, maintaining fiscal discipline has become increasingly critical to shield economies from external shocks and ensure confidence among global investors. India realized the importance of a controlled fiscal deficit when India was declared as …

Capital markets to watch budget balance between fiscal deficit and spending
Trending News
2 months ago

Capital markets to watch budget balance between fiscal deficit and spending

Live Mint  

India’s market participants will watch the upcoming Union Budget for 2025-26 for proposals to boost consumption while continuing on the patch of fiscal consolidation as the economy grapples with a slowdown. The expectations from finance minister Nirmala Sitharaman’s eight budget are centered around potential reforms and fiscal measures that could boost various sectors and maintain India's growth momentum, said Dhiraj …

RBI flags concerns over state sops even as tax revenue grows, spending quality improves
3 months, 1 week ago

RBI flags concerns over state sops even as tax revenue grows, spending quality improves

Live Mint  

Mumbai: India’s banking regulator has flagged concerns about a slew of sops announced by several states, even as their tax revenue has grown faster than the economic growth rate after the pandemic year of FY21, and spending quality improved in favour of more productive asset creation. Even as capital expenditure is projected to increase this year, states are expected to …

RBI flags concerns over state sops even as tax revenue grows, spending quality improves
3 months, 1 week ago

RBI flags concerns over state sops even as tax revenue grows, spending quality improves

Live Mint  

Mumbai: India’s banking regulator has flagged concerns about a slew of sops announced by several states, even as their tax revenue has grown faster than the economic growth rate after the pandemic year of FY21, and spending quality improved in favour of more productive asset creation. Even as capital expenditure is projected to increase this year, states are expected to …

Indian states must set glide path for fiscal consolidation, says central bank report
3 months, 1 week ago

Indian states must set glide path for fiscal consolidation, says central bank report

Live Mint  

MUMBAI, Dec 19 - Indian state governments must have clear and time-bound glide paths for fiscal consolidation with transparent and uniform reporting of liabilities, given the elevated debt levels, the Reserve Bank of India said in a report on Thursday. Following the strategy outlined in the federal budget 2024-25, states with elevated debt levels should establish a path for debt …

India Inc Calls for Balanced Fiscal Management
3 months, 2 weeks ago

India Inc Calls for Balanced Fiscal Management

Deccan Chronicle  

: Amid a slowing global economy, India Inc on Sunday urged the government to maintain a balanced fiscal management for macroeconomic stability with some more interventions to nudge the states towards fiscal prudence. It further said that this exercise would help forecast potential economic headwinds or tailwinds and assess their impact on the fiscal path.Looking at the next year’s budget, …

Fiscal battle: On borrowings and Kerala’s suit
11 months, 3 weeks ago

Fiscal battle: On borrowings and Kerala’s suit

The Hindu  

The Supreme Court of India order referring a suit filed by Kerala, challenging the Centre’s decisions curtailing its borrowings, to a Constitution Bench is a welcome development. The Court declined to grant an interim order to restore the position prior to the imposition of borrowing limits by the Centre, but the referral will give a larger Bench an opportunity to …

The severe erosion of fiscal federalism
1 year, 1 month ago

The severe erosion of fiscal federalism

The Hindu  

On February 8, Kerala Chief Minister Pinarayi Vijayan will lead a protest in New Delhi against the Centre for “placing Kerala on a financial embargo”. Kerala has moved the Supreme Court contending that the Centre’s imposition of a Net Borrowing Ceiling on the State, which limits borrowings from all sources, violates Article 293 of the Constitution. Major infrastructure projects initiated …

RBI report paints rosy fiscal picture
1 year, 2 months ago

RBI report paints rosy fiscal picture

New Indian Express  

Fitch Ratings in its August 2023 outlook on Kerala said it expects sustained economic growth to support the state’s steady performance to the fiscal year ending March 2027, although broad expenditure responsibilities and large infrastructure investment will lead to ongoing fiscal deficits and a steady rise in borrowings. It added that the state’s economic expansion should adequately offset the increased …

ECONOMIC PERSPECTIVES | How the Modi government is dismantling India’s federalism, politically and fiscally
1 year, 6 months ago

ECONOMIC PERSPECTIVES | How the Modi government is dismantling India’s federalism, politically and fiscally

The Hindu  

Published : Sep 21, 2023 11:00 IST - 6 MINS READ Indian federalism is under severe strain. Parallel to political challenges to federalism has been the much more consistent tendency to erode the fiscal and, therefore, economic policy space of State governments. Given the responsibilities that States have been allocated, which require expenditures in excess of their revenue generating capabilities, …

Rethink the emerging dynamics of India’s fiscal federalism
1 year, 7 months ago

Rethink the emerging dynamics of India’s fiscal federalism

The Hindu  

A ‘holding together federation’ with a built-in unitary bias, the Indian Constitution was the contextual product of centrifugal forces and fissiparous tendencies in the run-up to Independence. The paradigm shift from a planned economy to a market-mediated economic system, the transformation of a two-tier federation into a multi-tier fiscal system following the 73rd and 74th Constitutional Amendments, the abolition of …

A macro view of the fiscal health of States
1 year, 8 months ago

A macro view of the fiscal health of States

The Hindu  

In India, the States mobilise altogether more than a third of total revenue, spend 60% of combined government expenditure, and have a share in government borrowing that is around 40%. Fiscal challenges However, there are significant fiscal challenges that need correction in the short to medium time frame — the most critical being containing the revenue deficit of States. Out …

Reading the Union Budget with state govt spending statistics
2 years, 2 months ago

Reading the Union Budget with state govt spending statistics

Hindustan Times  

Finance minister Nirmala Sitharaman will present her fifth consecutive budget on February 1 this year. See Chart 1: Share of central and state spending in total government expenditure in India There was no significant increase in states’ fiscal deficit post-pandemic The union government’s fiscal deficit has seen a sharp increase in the wake of the pandemic. See Chart 2: centre …

The poor state of India’s fiscal federalism
2 years, 7 months ago

The poor state of India’s fiscal federalism

The Hindu  

In his last speech, in 1949, to the Constituent Assembly, B.R. While States lost their capacity to generate revenue by surrendering their rights in the wake of the Goods and Services Tax regime, their expenditure pattern too was distorted by the Union’s intrusion, particularly through its centrally A politicised institution Historically, India’s fiscal transfer worked through two pillars, i.e., the …

Why it’s time to worry about state finances
2 years, 8 months ago

Why it’s time to worry about state finances

Live Mint  

State governments are confronting various fiscal risks, particularly heavy debt, says the Reserve Bank of India’s latest bulletin. However, a rising trend in providing freebies such as free power, water, and gender-based free bus rides in many states have eaten into the expenditure pie. Power sector accounts for a large portion of states’ financial burden, since dues owed by discoms …

Several states showing warning signs of stress; need to take corrective actions, says RBI article
2 years, 9 months ago

Several states showing warning signs of stress; need to take corrective actions, says RBI article

Firstpost  

The article was prepared by a team of economist under the guidance of deputy governor Michael Debabrata Patra Mumbai: Referring to economic crisis in Sri Lanka, a Reserve Bank article on Thursday said states are showing warning signs of building stress, and the five most indebted ones – Punjab, Rajasthan, Bihar, Kerala and West Bengal – need to take corrective …

Fiscal Federalism and Centrally Sponsored Schemes
3 years, 6 months ago

Fiscal Federalism and Centrally Sponsored Schemes

Hindustan Times  

A significant proportion of fiscal transfers to States from the Centre is taken up by Centrally CSSs have been implemented via Article 282 of the Constitution of India. Since the Constitution came into force, CSSs routed via Article 282 have proliferated, with many CSSs dominating subjects within States’ legislative competence. As this report explains, Article 282 lifts the embargo placed …

States' GST Revenue Shortfall Can Be Bridged by Monetising Debt, NSSF: SBI Report
4 years, 6 months ago

States' GST Revenue Shortfall Can Be Bridged by Monetising Debt, NSSF: SBI Report

News 18  

Economists at SBI on Friday proposed three options for states to raise resources to bridge the shortfall in GST revenue from the Centre. This can be done by the Reserve Bank monetising the state governments' debts, enlargement of Ways and Means Advances, or taking recourse to the National Small Savings Fund, they said. The SBI economists said even though the …

Opinion | Need to focus on state government finances
6 years, 7 months ago

Opinion | Need to focus on state government finances

Live Mint  

The widening of the fiscal deficit has re-emerged as a cause of concern for the Indian economy. As per a recent Reserve Bank of India report on state government finances, the consolidated fiscal deficit of the state governments in FY18 was 3.1%, against the budget estimate of 2.7%. While the state governments’ expenditure commitment has increased over time in line …

The state of state government finances
6 years, 8 months ago

The state of state government finances

Live Mint  

Even though state governments collectively spend much more than the Union government every year, state budgets do not attract the attention they deserve. Some financial market analysts keep an eye on state budgets, but it remains largely an academic exercise since bond market investors neither reward nor punish states depending on their fiscal situations. While the deterioration in 2015-16 and …

RBI says fiscal position of states is under pressure again
6 years, 8 months ago

RBI says fiscal position of states is under pressure again

Live Mint  

Mumbai: Pay revisions, interest payments and farm loan waivers are stressing state government finances yet again, the Reserve Bank of India said in a report. States have budgeted a gross fiscal deficit of 2.6% of gross domestic product during FY19, with 11 states budgeting above 3%, RBI said in its annual report titled State Finances: A Study of Budgets. “With …

States’ market borrowings to rise
7 years, 4 months ago

States’ market borrowings to rise

Live Mint  

The Indian state governments’ market borrowings, which is the chief source of funding of their gross fiscal deficits, have risen sharply in recent years, in contrast to the stagnation displayed by the government’s dated market borrowings. A healthy trend of reissuing SDLs was observed in Q2 FY18, in contrast to the prevailing practice generally followed by state governments of issuing …

State governments driving fiscal expansion in India
7 years, 11 months ago

State governments driving fiscal expansion in India

Live Mint  

Ever since the Fiscal Responsibility and Budget Management Act was introduced in India, state governments have largely been conservative spenders, limiting their spending far more effectively than the Union government. This trend seems to be reversing in recent years, with the aggregate fiscal deficit of states rising at a time when the aggregate fiscal deficit of the Union government has …

Why deteriorating state finances should worry us
7 years, 11 months ago

Why deteriorating state finances should worry us

Live Mint  

“I think it undermines an honest credit culture…overall government borrowing goes up, yields on government bonds also are impacted. Even though finance minister Arun Jaitley has said that the fiscal onus of loan waivers will be on states, it should worry the Central government as the chances of a credit-rating upgrade will diminish. Since state governments at the aggregate level …

India caps state govts’ deficit to curb reckless spending
8 years, 11 months ago

India caps state govts’ deficit to curb reckless spending

Live Mint  

New Delhi: Prime Minister Narendra Modi’s administration approved a proposal to cap states’ budget deficits as it looks to shrink Asia’s widest shortfall. State governments will have to limit the gap to 3% of their gross domestic product in a financial year, Frank Noronha, the federal government’s spokesman, wrote on Twitter. Continued fiscal consolidation is key to protecting India’s credit …

Competitive federalism in the state bond market
9 years, 1 month ago

Competitive federalism in the state bond market

Live Mint  

One data point does not make a trend. R. Sivakumar, head of fixed income at Axis Mutual Fund felt that the power distribution company revival scheme, which involves the conversion of discom loans into state government bonds, may be impacting the view that investors are taking on different states. In the case of West Bengal, market borrowings over the last …

RBI says states gross fiscal deficit improves by 20 bps | India TV News
9 years, 10 months ago

RBI says states gross fiscal deficit improves by 20 bps | India TV News

India TV News  

Mumbai: The Reserve Bank called for higher capital outlays, consistent fiscal consolidation and limiting the debt-GDP ratio to improve the finances of the states, whose combined gross fiscal deficit has improved by 20 bps to 2.3 per cent of GDP in FY 2014-15. While the combined gross fiscal deficit of the states improved to 2.3 per cent in FY 2014-15 …

Higher govt borrowings hurting corporate debt market: RBI | IndiaTV New
10 years ago

Higher govt borrowings hurting corporate debt market: RBI | IndiaTV New

India TV News  

The rise in government borrowings through bonds is impeding the growth of the corporate debt market in the country, Reserve Bank Deputy Governor R Gandhi said today. "The huge supply of government paper in the country is one of the major impediments to the growth of corporate bond market," Gandhi said, addressing a corporate debt event organised by Care Ratings …

‘Fiscal deficit manifest at Centre, not in States’
11 years ago

‘Fiscal deficit manifest at Centre, not in States’

The Hindu  

The fiscal deficit problem is not as visible in the States’ public finances as it is at the Centre, National Institute of Public Finance & Policy Director Rathin Roy said here on Saturday. “With consistently improving quality of management of public finances despite their continued demonstrated ability to give handouts, the States have completed fiscal consolidation,” he said. “If a …

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