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 account for about 60% of total government expenditure, maintaining fiscal discipline and quality of spending at the state level is becoming increasingly important. An analysis of state government finances published by the RBI last year showed that even as revenue expenditure continues to dominate state government budgets, there has been an improvement in the quality of expenditure. First, even though the state deficit remains under the FRBM target, the increase in deficit will limit the benefits of fiscal consolidation by the Central government.

States State Central Level Deficit Fiscal Expenditure State Governments Fiscal Discipline Loan Waivers Frbm  deficit  worry  quality  waivers  level  gdp  finances  deteriorating  expenditure  fiscal  state  states  affect

History of this topic

Kerala Minister blames Centre’s fiscal policies for financial strain on states
5 days, 14 hours ago

Kerala Minister blames Centre’s fiscal policies for financial strain on states

Live Mint  

Thiruvananthapuram, Mar 24 Kerala Finance Minister K N Balagopal on Monday said the country is going through a challenging period in which the rights of states are "under threat", and even economically sound states are facing "unprecedented financial strains" due to the Centre's fiscal policies. Speaking during the discussion on the Kerala Appropriation Bill 2025, Balagopal said if the state …

Equity, discipline must guide states’ fiscal behaviour
1 week, 4 days 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, …

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 …

A tightrope act: The budget does a good job of balancing divergent demands
1 month, 3 weeks ago

A tightrope act: The budget does a good job of balancing divergent demands

Live Mint  

India’s budget for 2025-26 demonstrates a careful balance between an unwavering focus on macroeconomic stability by continuing on a path of fiscal prudence and addressing growth concerns. Notably, fiscal consolidation remains the budget’s primary focus, with its fiscal-deficit target set at 4.4% of GDP, a further reduction of 0.4 percentage points. This cut, which accounts for almost the entire fiscal …

Budget 2025: India’s fiscal consolidation is well on track despite hurdles
1 month, 4 weeks ago

Budget 2025: India’s fiscal consolidation is well on track despite hurdles

Live Mint  

As is usually the case, India’s Union budget for 2025-26, to be announced on 1 February, is expected to attract a lot of attention from different stakeholders in the economy, particularly with its growth momentum having sprung a significant downside surprise in 2024-25. Indeed, both the interim budget in February and the post-election budget in July exceeded expectations on the …

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 …

Appropriate spending must win India’s fiscal tug-of-war at the state level
2 months, 4 weeks ago

Appropriate spending must win India’s fiscal tug-of-war at the state level

Live Mint  

State governments often walk a tightrope between social demands and fiscal sustainability—a predicament Alberto Alesina captured by warning of “too large and too small" governments. Similarly, a 2024 Reserve Bank of India analysis highlights that while revenue expenditure multipliers are short-lived and average 1.43, capex has a significantly higher impact with a peak multiplier of 3.84 over three years. Political …

RBI asks States to have sustained fiscal prudence
3 months, 1 week ago

RBI asks States to have sustained fiscal prudence

The Hindu  

State governments contained their consolidated gross fiscal deficit within 3% of the gross domestic product and their revenue deficit at 0.2% of GDP during 2022-23 and 2023-24, the Reserve Bank of India said in its report on state finances. “In view of high debt levels, contingent liabilities and the rising subsidy burden, State government finances would benefit from the adoption …

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, 3 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, …

Govt. on track to reduce fiscal deficit: Fitch
8 months ago

Govt. on track to reduce fiscal deficit: Fitch

The Hindu  

Fitch Ratings on Friday exuded confidence that the Government of India should be able to achieve its enhanced goal of reducing the fiscal deficit to 4.9% of GDP this year, and further below 4.5% of GDP next year, but noted that the post-election Budget did not provide much clarity on medium-term targets. While the Budget did highlight “a desire to …

India's fiscal consolidation likely to become challenging with coalition government: Fitch
9 months, 3 weeks ago

India's fiscal consolidation likely to become challenging with coalition government: Fitch

Hindustan Times  

India's medium-term fiscal consolidation is likely to get more challenging as a new coalition government comes to power, an analyst at credit rating agency Fitch, said on Friday, according to a Reuters report. "Our expectation is that the government will look to achieve the 4.5% fiscal deficit target by 2025-26," Jeremy Zook, director of Asia-Pacific sovereigns at Fitch told Reuters …

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 …

Budget 2024: It’s tax buoyancy that shrank the deficit
1 year, 1 month ago

Budget 2024: It’s tax buoyancy that shrank the deficit

Live Mint  

A quick glance at the fiscal arithmetic reveals that there is no severe fiscal austerity proposed in the budget. Given nominal GDP growth of 10.5% and aggregate tax revenue growth of 11.5%, the government has met its fiscal deficit target through tax buoyancy, and not through severe public expenditure reduction. As against a 2023-24 Budget Estimate of ₹61,000 crore, the …

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 …

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 …

Data | Five Southern States took off-Budget loans worth ₹2.34 lakh crore in FY21
2 years, 1 month ago

Data | Five Southern States took off-Budget loans worth ₹2.34 lakh crore in FY21

The Hindu  

While tabling the Budget a week ago, Telangana Finance Minister T. Harish Rao accused the Centre of “creating hurdles after hurdles” in the development of the State. Five Southern States — Telangana, Andhra Pradesh, Kerala, Tamil Nadu and Karnataka — accounted for ₹2.34 lakh crore, around 93%, of the total off-Budget liabilities of eleven major States analysed. In almost all …

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 …

Challenges of sub-national fiscal correction
2 years, 7 months ago

Challenges of sub-national fiscal correction

The Hindu  

Recent concerns over excessive doling out of freebies by States are often interpreted as intrusion into the federal powers of the States. As both the Union government and States are expected to work closely in a co-operative federal structure, frictions arising out of these exchanges might have repercussions on both resource sharing and expenditure prioritisation. While States demand more fiscal …

Explained | Kerala’s mounting public debt
2 years, 7 months ago

Explained | Kerala’s mounting public debt

The Hindu  

The story so far: Over the past few months, Kerala’s mounting debt liabilities have been brought into sharp focus with the Reserve Bank of India, the Comptroller and Auditor General, and the opposition Congress-led United Democratic Front flagging the issue. Kerala Infrastructure Investment Fund Board A body corporate constituted by the Government of Kerala to mobilise financial resources outside of …

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 …

Slower Consolidation to Constrain India's Fiscal Strength Over Medium Term: Moody's
4 years, 1 month ago

Slower Consolidation to Constrain India's Fiscal Strength Over Medium Term: Moody's

News 18  

Rating agency Moody’s on Wednesday India’s fiscal deficit projections are higher than expected and slower consolidation will constrain its fiscal strength over the medium term. The US-based agency said it expects India’s nominal GDP growth to rise to closer to 17 per cent in fiscal 2021, higher than 14.4 per cent projected in the Budget. The budget’s focus on higher …

Fiscal deficit of states to hit peak of ₹8.7 lakh crore, says CRISIL
4 years, 2 months ago

Fiscal deficit of states to hit peak of ₹8.7 lakh crore, says CRISIL

The Hindu  

The States are headed for a fourfold expansion in their revenue deficit this fiscal over the last year due to far lesser tax collections, Crisil Ratings said in a report. “This will not only expand States’ aggregate gross fiscal deficit to an all-time high of ₹8.7 lakh crore, or 4.7% of GSDP, but also skew its composition towards revenue deficit …

Combined Fiscal Deficit of Centre, States May Go Up to 14% in FY21: C Rangarajan
4 years, 5 months ago

Combined Fiscal Deficit of Centre, States May Go Up to 14% in FY21: C Rangarajan

News 18  

The combined fiscal deficit of states and the centre during the current year may go up to 14 per cent against the mandated level of six per cent, former Reserve Bank Governor C Rangarajan said on Thursday. "So therefore we are essentially talking about 13.8per cent or 14 per cent of the GDP as the overall fiscal deficit of the …

Govt Should Have Clear Exit Strategy, Milestones Needed for Fiscal Consolidation: RBI
4 years, 7 months ago

Govt Should Have Clear Exit Strategy, Milestones Needed for Fiscal Consolidation: RBI

News 18  

The government should have a clear exit strategy and credible milestones for fiscal consolidation in the coming years, the Reserve Bank said on Tuesday in its annual report amid meeting the fiscal targets becoming more challenging due to the coronavirus pandemic. Based on information from 25 states, the general government fiscal deficit increased from 5.4 per cent of GDP in …

Maharashtra’s politics is a mess, but its finances aren’t
5 years, 4 months ago

Maharashtra’s politics is a mess, but its finances aren’t

Live Mint  

Maharashtra is among the most industrialized states in the country, boasting of finances that are better than most others. The Maharashtra government ran a fiscal deficit of ₹56,053 crore—2.1% of the state’s GDP—in FY19. The fiscal deficit of Maharashtra in FY19 was at 2.1% of the state’s GDP. In fact, in FY20, Maharashtra hopes to achieve a fiscal deficit of …

State finances show worrying trend: Report
5 years, 5 months ago

State finances show worrying trend: Report

Live Mint  

New Delhi: Reflecting slowdown in the economy, monthly finances of 17 state governments show worrying trend with total receipts growing only 4.1% in the first five months of the current fiscal, compared to same period a year ago. "For the first five months of FY20, while capital expenditure grew only 0.6% year-on-year, core revenue spending grew 7.6% YoY. Thus, total …

India's debt is 300% of its revenue. Will the Budget address this?
5 years, 8 months ago

India's debt is 300% of its revenue. Will the Budget address this?

India Today  

From common man to the state, managing the income and expenditure is always a daunting task, and any miscalculation may lead to debt trap as India's centre and state governments are likely to face. India's general government debt level is at 69 per cent of the GDP in FY19. General Government Debt worked out to be 68.2 per cent of …

GST will not reduce deficits of state governments significantly: S&P Global Ratings report
5 years, 10 months ago

GST will not reduce deficits of state governments significantly: S&P Global Ratings report

Firstpost  

Singapore: Goods and Services Tax regime in India is not likely to reduce the deficits of state governments significantly, amid large and growing expenditure mandates for the social sector as well as capital spending, says a report. According to S&P Global Ratings the institutional framework for Indian states is evolving, but there are structural deficits due to persistent revenue expenditure …

Farm-loan waivers to hit states fiscal deficit targets: Report
6 years, 2 months ago

Farm-loan waivers to hit states fiscal deficit targets: Report

Live Mint  

With populist decisions like farm loan waivers and other financial support schemes likely to gain significance in the run-up to the forthcoming next general elections, aggregate fiscal deficit of the states is expected to reach 3.2 percent in FY20, warns a report. A larger impact is expected on fiscal and revenue deficit to gross state domestic product ratios for MP, …

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 …

Opinion: The urgent need for states to get fiscally fit
6 years, 7 months ago

Opinion: The urgent need for states to get fiscally fit

Live Mint  

The recent report, “State Finances: A Study of State Budgets 2018” by the Reserve Bank of India confirms what has been observed for a while; that the state of state finances is in “deep trouble” territory. States implementing wage increases reported a 28% growth in revenue expenditure while interest payments grew 16% driven by the market borrowing binge of recent …

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 …

Budget 2018: Govt revising fiscal deficit target to 3.5% won't impact overall economic growth, says Moody's
7 years, 1 month ago

Budget 2018: Govt revising fiscal deficit target to 3.5% won't impact overall economic growth, says Moody's

Firstpost  

New Delhi: The Budget for 2018-19 strikes a balance between fiscal prudence and growth, and a “slight” slippage in fiscal deficit has no material impact on overall economic strength. “The revised fiscal consolidation path is modestly shallower than the previous roadmap, but does not fundamentally alter India’s overall fiscal strength,” says William Foster, Vice President-Senior Credit Officer at Moody’s. “Slight …

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 …

We proposed a paradigm shift in fiscal management: N.K. Singh
7 years, 11 months ago

We proposed a paradigm shift in fiscal management: N.K. Singh

Live Mint  

Nagoya, Japan: Nand Kishore Singh has served in various capacities including as a member of Parliament in the Rajya Sabha and more recently as chairman of the Fiscal Responsibility and Budget Management Committee, which submitted its report to the government ahead of the presentation of this year’s budget. He dwelled on the importance of the panel’s recommendations, the paradigm shift …

WA budget shows worst set of figures in state's history, Opposition says
8 years, 10 months ago

WA budget shows worst set of figures in state's history, Opposition says

ABC  

West Australian Opposition Leader Mark McGowan has used his budget-in-reply speech to Parliament to cast the two terms of the Barnett Government as an economic and financial catastrophe for the state. Responding to last week's state budget, Mr McGowan told Parliament the Government had increased debt by 1,000 per cent, with state debt spiralling to $40.2 billion by 2020, and …

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 …

‘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 …

This is not fiscal consolidation
13 years ago

This is not fiscal consolidation

The Hindu  

Going into Part B of his budget speech in Parliament, Pranab Mukherjee complained that the life of a Finance Minister is not easy. The fiscal deficit in the current year was widely expected to exceed the budget estimate of 4.6 per cent of GDP. What is even more remarkable is that a fiscal deficit for FY13 at 5.1 per cent …

Survey for structural reforms in spending
13 years ago

Survey for structural reforms in spending

The Hindu  

The Economic Survey tabled in Parliament by Finance Minister Pranab Mukherjee on Thursday stressed the need for concerted steps to cut spending and check slippage in government finances so as to achieve fiscal consolidation. Noting that although the fiscal deficit is likely to come down to 4.1 per cent in 2012-13, the Survey said: “Going forward there is a need …

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