States Likely To Witness Elevated Fiscal Deficit

RBI stated that states' consolidated gross fiscal deficit (GFD) is placed at 2.8% of GDP for 2020-21; however, the COVID-19 pandemic may alter budget estimates substantially. The consequent rising levels of debt and guarantees pose risks to state finances, going forward. Sustaining the recovery from the pandemic will entail boosting investment in health care systems consistent with demographic and co-morbidity profiles; building digital infrastructure for more efficient provision of public services; upgrading the urban infrastructure; and increasing engagement of local governments.

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