States' gross fiscal deficit improves by 20 bps to 2.3% of GDP

The Reserve Bank today called for higher capital outlays, consistent fiscal consolidation and limiting the debt-GDP ratio to improve the finances of the states, whose combined gross fiscal deficit has improved by 20 bps to 2.3 per cent of GDP in FY 2014-15.
"Creating fiscal space for higher capital outlays, improving the quality of fiscal consolidation and containing the debt-GDP ratio of the states are crucial to improving their finances," RBI said in its report on 'State finances: A study of budgets of 2014-15' released here this late evening.
The report said based on the latest budget documents of 17 states, which account for 88 per cent of both the non-debt receipts and total expenditure in 2014-15 (budget estimates), the revised estimates for 2014-15 indicate deterioration in the deficit indicators as compared to the budget estimates.

While the combined gross fiscal deficit of the states improved to 2.3 per cent in FY 2014-15 from 2.5 per cent in the previous year, their gross revenue surplus improved in FY15 to 0.4 per cent from zero per cent of GDP in the previous fiscal.
However, if we compare the fiscal deficit in FY 2011-12 when it stood at 1.9 per cent of the combined GDP of the states and 2 per cent in FY2012-13 and 2.2 per cent in FY2013-14, the revenue surplus stood at 0.3 per cent, 0.2 per cent, 0.4 per cent and 0.0 per cent of GDP, respectively.

In absolute terms, the report said, the gross fiscal deficit of states stood at Rs 2,95,060 crore or 2.3 per cent in 2014-15 (BE) as against Rs 2,45,050 crore or 2.2 per cent in 2013-14 (BE), while the combined revenue surplus stood at Rs 54,170 crore or 0.4 per cent of their GDP as against a surplus of Rs 47,730 crore or 0.4 per cent, on the overall improvement in revenue collection.
The post-crisis fiscal consolidation experience of the states indicates erosion of revenue surpluses particularly in 2013-14 (revised estimates), the report noted.
Although the fiscal deficit at the consolidated level remained within the target set by 13th Finance Commission during the period under review, state level targets were not met by some states, it said.