How UDAY and pay revision are restricting Rajasthan's fiscal space

Limited fiscal room has led to the state cutting back on capital outlay and social sector spending

When a temblor strikes a place, it would be a great mistake on the part of the affected not to prepare for the aftershocks. The case of Rajasthan’s state finances is similar.

In 2015-16, the state government took over the loans of power distribution companies (discoms) under Ujwal DISCOM Assurance Yojana (UDAY). This resulted in a sharp increase in its interest burden. Add to this the rise in its expenditure on account of the revision in salaries of government officials and the decision to waive farm loans to the tune of Rs 80 billion, and the fiscal space got severely