Indian states' fiscal battle amid economic slowdown: Explained in 8 charts

The RBI study shows that the aggregate debt level could go beyond 25 per cent of GDP in the current year itself if off-budget guarantees are taken into account

The Reserve Bank of India’s annual study on state budgets underlines weaknesses in financial position of states.

A large number of states are running fiscal deficit beyond the upper limit of 3 per cent of gross domestic product, laid down by the Fiscal Responsibility and Budget Management (FRBM) framework (Chart 1). Moreover, most of them are laggards in terms of per capita income levels. Owing to the tight revenue situation and the pressure on exchequer emanating from power utilities and farm sector support (loan waivers and income support), states are being compelled to borrow more (Chart 2). The RBI study