States may see fiscal slippage in FY18, public investments to be lower

HSBC estimates market borrowings by states to swell up to 2.6 per cent of GDP in FY18

State governments are unlikely to meet their fiscal deficit targets in FY18. Against a budgeted deficit of 2.6 per cent of gross domestic product (GSDP), states may see slippages of 0.2 per cent, suggests a study by HSBC Global Research. The slippages are largely due to the implementation of the pay commission's suggestions and the interest payments due to Ujwal Discom Assurance Yojana (UDAY). In FY17, states overshot their fiscal deficit targets. Against an original target of 2.6 per cent, the fiscal deficit rose to 2.8 per cent.
 
This suggests that states are likely borrow more from markets in