States may not be able to stick to the path of fiscal consolidation: Icra

The corresponding rise in revenue expenditure may lead some states to curtail their capital spending, worsening quality of expenditure

At the aggregate level, state governments have budgeted for a decline in their fiscal deficits in 2018-19. But according to an analysis by rating agency Icra, states may not be able to stick to the path of fiscal consolidation owing to factors such as farm loan waivers, election-related spending, and flood relief. 

Further, gross borrowings by state governments may well rise to Rs 5-5.3 trillion in 2018-19, up from Rs 4.2 trillion in 2018 notes ICRA in its latest assessment of state finances.

In its report on state finances, the Reserve Bank of India (RBI) estimates that the aggregate fiscal