The Reserve Bank of India (RBI) on 16h January released the Report titled “State Finances: A Study of Budgets of 2022-23”, an annual publication that provides information, analysis and an assessment of the finances of State governments for 2022-23.
The theme of this year’s Report is “Capital Formation in India – The Role of States”.
Key points
- The state debt-to-GDP ratio remains uncomfortably high. As per the report, the debt-to-GDP ratio has fallen from 31.1 per cent in 2020-21 – a year when states had struggled to manage the economic fallout of the pandemic — to 29.5 per cent in 2022-23.
- The Fiscal Responsibility and Budget Management review committee, headed by N K Singh, had recommended a debt-to-GDP ratio of 20 per cent for states. Interest payments by states rose to 2 per cent of GDP in 2020-21, up from 1.7 per cent in 2017-18.
- States expect this to come down to 1.8 per cent in 2022-23. States’ gross fiscal deficit (GFD) is budgeted to decline from 4.1 per cent of gross domestic product (GDP) in 2020-21 to 3.4 per cent in 2022-23. Gross Fiscal Deficit (GFD) is the difference between aggregate disbursements net of debt repayments and recovery of loans and revenue receipts and non-debt capital receipts.
- The report pointed out that CAG data indicated that state governments’ capital expenditure had grown at a modest rate of 7 per cent in the first six months of the current fiscal year versus 50 per cent growth showed by the Centre. Therefore, states would need to increase investment in the second half of the year and such efforts would be supported by buoyant tax and non-tax revenues, the report said.
