A recent Crisil rating report sheds light on the financial landscape of Indian states, indicating that their debt burden is expected to persist at a substantial 31-32% of their gross domestic product (GDP) during the fiscal year 2023-24. This fiscal scenario is primarily attributed to a combination of higher capital expenditure and moderate revenue growth.
Despite the challenges posed by the economic landscape, the gross fiscal deficit (GFD) as a ratio of Gross State Domestic Product (GSDP) is anticipated to remain at a manageable 2.5%. It is noteworthy that this figure falls below the mandated level of 3, as stipulated by the Fiscal Responsibility and Budget Management Act.
The report emphasizes that low revenue growth, coupled with significant capital outlays, will contribute to maintaining the debt level at 31-32% of GDP. Indebtedness is measured by the ratio of debt to GSDP, a metric that has seen a notable increase post-COVID pandemic.
The insights provided in the report are based on data from the top 18 states, representing 90% of the aggregate GSDP. Experts note that this fiscal scenario necessitates careful fiscal management and strategic decision-making to balance capital outlays and revenue generation.
