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

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 for corrective steps in five most indebted ones has evoked mixed response, with some calling the assessment wrong and others pointing to rise in income to counter calls for cut in expenditure. Referring to the economic crisis in Sri Lanka, the RBI article prepared by a team of economist under the guidance of Deputy Governor Michael Debabrata Patra had on Thursday stated that the five most indebted states- Punjab, Rajasthan, Bihar, Kerala and West Bengal- need to take corrective measures by cutting down expenditure on non-merit goods. Former Kerala finance minister and state secretariat member of ruling CPI, T M Thomas Isaac said the state cannot cut down its expenditure and opined that the RBI has taken a short sighted view on the states showing warning signs of stress. "Stress tests show that the fiscal conditions of the most indebted state governments are expected to deteriorate further, with their debt-GSDP ratio likely to remain above 35 per cent in 2026-27," the authors said.