Several states showing warning signs of stress; need to take corrective actions, says RBI article
2 years, 6 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 measures by cutting down expenditure on non-merit goods. The fiscal conditions among states in India are showing warning signs of building stress,” it said. As per the article, new sources of risks have emerged from relaunch of the old pension scheme by some states; rising expenditure on non-merit freebies; expanding contingent liabilities; and the ballooning overdue of – warranting strategic corrective measures. Alongside, state governments need to conduct fiscal risk analyses and stress test their debt profiles regularly to be able to put in place provisioning and other specific risk mitigation strategies to manage fiscal risks efficiently.

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History of this topic

Prudent policy: India should not let public debt eclipse the fiscal deficit
1 week, 2 days ago

Prudent policy: India should not let public debt eclipse the fiscal deficit

Live Mint  

In a 2020 address to the nation soon after the outbreak of covid, Prime Minister Narendra Modi cited age-old wisdom that advised against losing control of three things: fire, debt and disease. To cushion India’s economy from the pandemic’s shock, though, government spending had to vastly exceed its inflows, taking its fiscal deficit to 9% plus of GDP in 2020-21. …

RBI asks States to have sustained fiscal prudence
3 weeks, 5 days 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 weeks, 5 days 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 weeks, 5 days 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 …

India Inc Calls for Balanced Fiscal Management
1 month 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, …

Capital spending of 13 major states to be below budget estimate in FY25 after sluggish start: Icra
2 months, 4 weeks ago

Capital spending of 13 major states to be below budget estimate in FY25 after sluggish start: Icra

Live Mint  

New Delhi: The combined capital spending of 13 major state governments in India is expected to grow by 13% to ₹6.5 trillion in FY25, below the budget estimate of ₹7.2 trillion, rating company Icra said on Wednesday. {{^adFree}} {{/adFree}} A sluggish start to capital expenditure and an expected shortfall in revenue due to elections during April-May are likely to have …

RBI Rejects IMF Warning of India's Debt to GDP Exceeding 100%
10 months, 3 weeks ago

RBI Rejects IMF Warning of India's Debt to GDP Exceeding 100%

Deccan Chronicle  

Mumbai: Spending on social and physical infrastructure, climate mitigation,digitalisation and skilling the labour force can yield long-lasting growth dividends. Using a dynamic stochastic general equilibrium model, the economists found that if the government expenditure is directed towards employment-generating sectors, climate risk mitigation and digitalisation, the debt-GDP ratio of the general government can decline substantially to 73.4 per cent of GDP …

Kerala is one of the most financially unhealthy States in the country, Centre tells SC
11 months, 1 week ago

Kerala is one of the most financially unhealthy States in the country, Centre tells SC

The Hindu  

The Centre has told the Supreme Court that Kerala was “one of the most financially unhealthy States” and debts run by States affect the credit rating of the whole country. The Union government said “substantial financial resources” were provided to the Kerala government from 2020-21 to 2023-24 over and above the amount recommended by the 15th Finance Commission. “Despite the …

Why it’s time to worry about state finances
2 years, 6 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 …

Mixed reaction to RBI article warning signs of stress due to high debt in several states
2 years, 6 months ago

Mixed reaction to RBI article warning signs of stress due to high debt in several states

India TV News  

Highlights RBI write-up flagging concerns over building financial stress in several states It called for corrective steps in 5 most indebted ones has evoked mixed response RBI article was prepared by a team of economist under guidance of Dy Guv Michael Debabrata Patra A Reserve Bank of India write-up flagging concerns over building financial stress in several states and calling …

RBI shows resilience in the face of shocks
2 years, 7 months ago

RBI shows resilience in the face of shocks

Hindustan Times  

A remarkable feature of India’s governance model in the last few years has been its ability to provide relative resilience in the face of unanticipated shocks. But, as RBI has also made clear, while it is fighting to check inflation, most of the shocks to prices have emanated from factors beyond India’s control. And with RBI’s peers also fighting inflation …

PM Modi advisor favors putting fiscal deficit concerns on backburner
3 years, 6 months ago

PM Modi advisor favors putting fiscal deficit concerns on backburner

Live Mint  

India should not let fiscal deficit worries stop it from spending more to fight the Covid-19 crisis, an adviser to Prime Minister Narendra Modi said. “The direct relation that people have talked about between fiscal expansion and inflation doesn’t really hold,” Kumar said, pointing to price-growth remaining mostly within the central bank’s targeted 2%-6% range this year. The recent spike …

Amid Tussle over Compensation Dues, Here's Why States' Expenditure Matters More Than Borrowing
4 years, 3 months ago

Amid Tussle over Compensation Dues, Here's Why States' Expenditure Matters More Than Borrowing

News 18  

This year, Indian state governments, so far, have market loans, borrowings amounting to Rs 1.93 lakh crore, which is 76 per cent higher than the corresponding period last year. Especially, states like Maharashtra and Uttar Pradesh had an accumulated outstanding debt of around Rs six lakh crore while Maharashtra had a debt of Rs five lakh crore. States like Haryana, …

Petrol, diesel excise cut: Fiscal stress staring at India; can Centre, states have the guts to tackle it?
6 years, 3 months ago

Petrol, diesel excise cut: Fiscal stress staring at India; can Centre, states have the guts to tackle it?

Firstpost  

Post the petrol, diesel, excise cut, how the Centre manages to stick to the fiscal deficit target of 3.3 percent is going to be interesting to watch Just about a month earlier, the government was firm about not cutting excise duty on petrol and diesel even as global crude prices rose almost every day. In fact, some would argue that …

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