States' total outstanding liabilities decline in recent year but still remain above pre-pandemic level

Reserve Bank of India (RBI) released the Report "State Finances: A Study of Budgets of 2024-25". The theme of this year's Report is "Fiscal Reforms by States" yesterday, offering a comprehensive assessment of the finances of State governments for 2024-25 against the backdrop of actual and revised/provisional accounts for 2022-23 and 2023-24, respectively. State governments contained their consolidated gross fiscal deficit (GFD) within 3 per cent of gross domestic product (GDP) and their revenue deficit at 0.2 per cent of GDP during 2022-23 and 2023-24. In 2024-25, States have budgeted a GFD of 3.2 per cent of GDP.

The improvement in the quality of expenditure was sustained, with capital expenditure rising from 2.4 per cent of GDP in 2021-22 to 2.8 per cent in 2023-24 and budgeted at 3.1 per cent of GDP in 2024-25. States' total outstanding liabilities declined from 31.0 per cent of GDP at end-March 2021 to 28.5 per cent at end-March 2024 but remain above the pre-pandemic level (25.3 per cent at end-March 2019). State-specific Fiscal Responsibility Legislations (FRLs) along with tax and expenditure reforms have strengthened their finances over the past two decades, the RBI noted.

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