Farm loan waivers, implementation of Pay Commission awards and issuance of UDAY bonds have put pressure on states’ fiscal position.
Farm loan waivers, implementation of Pay Commission awards and issuance of UDAY bonds have put pressure on states’ fiscal position. The total farm loan waiver during FY18 amounted to 0.32% of the GDP as per revised estimates as compared with 0.27% to budget estimates.
The consolidated gross fiscal deficit of states overshot the budget estimates in FY18 due to shortfall in states’ own-tax revenues and higher revenue expenditure. Data from RBI’s state finance for FY18 and FY19 show states’ gross fiscal deficit touching 3.1% of GDP in FY18 (revised estimates) compared with 2.7% in budget estimates. Fiscal pressures are emerging for several states on the expenditure side.
For FY19, states have budgeted a consolidated gross fiscal deficit of 2.6% of GDP, with 11 states planning to remain above the 3% threshold. In FY19, states’ revenue capacity is likely to grow with the stabilisation of GST and the consequent expansion of tax base and efficiency.
Outstanding liabilities of states have been growing at double-digits consistently, barring FY15. The debt-to-GDP ratio of all states together increased from 22.8% in FY12 to 24.3% in FY19 (BE). State-wise data reveal that the debt-to-GDP ratio increased in FY19 for 16 states. States’ borrowing costs have been rising steadily, with their bond issuances attracting premium on the Centre’s bond yield.