State govts’ combined fiscal deficit seen at 2.6 per cent

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Updated: October 1, 2019 7:06:37 AM

The NK Singh panel on fiscal responsibility had suggested the overall public debt-to-GDP ratio of 60% by 2022-23 — 40% for the Centre and 20% for the states.

According to the Reserve Bank of India study of state Budgets of FY20, their combined GFD is projected to be 2.6% of the GDP.

The state governments seem poised to keep their consolidated gross fiscal deficit (GFD) within the FRBM (Fiscal Responsibility and Budget Management) limit of 3% for the third financial year in a row.

According to the Reserve Bank of India study of state Budgets of FY20, their combined GFD is projected to be 2.6% of the GDP.
The consolidated state GFD was 2.9% of the GDP in FY19 (revised estimate) and 2.4% of the GDP in FY18, the year which saw a sharp reduction in their deficits thanks to the guaranteed GST revenue that sort of insulated them from the slow growth in tax collections.
As FE reported earlier, the actual consolidated GFD of states could be even lower given that the Controller General of Accounts’ data for 27 states showed that post-RE, they, in aggregate, sharply cut expenditure to contain their combined deficit at 2.5% of their aggregate GDP.

“Going forward, it is important for states to pursue their capital expenditure plans as budgeted in 2019-20, considering that states account for two-thirds of general government capital expenditure with implications for the overall economic activity and welfare,” the RBI noted.

The RBI, however, said outstanding debt of the states has risen over the last five years to 25% of the GDP, posing medium-term challenges to its sustainability. The NK Singh panel on fiscal responsibility had suggested the overall public debt-to-GDP ratio of 60% by 2022-23 — 40% for the Centre and 20% for the states.

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