#statefinances

💰 Fiscal Health of Indian States – At a Glance

📊 Introduction States spend more than the Union on health, education & welfare. Post-pandemic, rising debt, uneven revenues & welfare paradox are critical challenges.

📈 Fiscal Trends

2000s: ⚠️ High deficits

2010s: ✅ Recovery with GST & reforms

Post-2020: 💥 Pandemic shock, shrinking revenues

💸 Revenue Patterns

Rich vs Poor: Maharashtra ~70% internal revenue, Arunachal ~9%

Volatile sources: 🎰 Kerala lotteries, ⛏️ Odisha mining, 🏞️ Telangana land sales

Vertical imbalance: UP depends 58% on Union transfers

📉 Borrowing & Debt

High debt: Punjab 45%, Rajasthan 40%, Bihar 39%

Moderate: Maharashtra & Gujarat ~20%

Small States’ stress: Nagaland, Mizoram, Manipur 40–60%

⚖️ Welfare Paradox

Surpluses often due to 🏦 Central transfers, off-budget borrowings

Under-investment in 🏥 health, 🏫 education, 🚧 infrastructure

Populist schemes vs fiscal prudence

🛑 Challenges Ahead

Rising debt → limited fiscal flexibility

Volatile revenues → risk to growth

Vertical & horizontal fiscal imbalance

Welfare pressures vs prudence

📜 Legal & Institutional Context

Article 293: Borrowing rules with Union approval

Finance Commission: Tax revenue distribution

FRBM Acts: Fiscal deficit & debt targets

🧩 GST & Fiscal Autonomy

GST reduced State autonomy

Reliance on GST compensation till 2022

Post-GST revenue gaps ↑

⚡ Federal Tensions

Vertical: Rich States fund themselves, poor States depend

Horizontal: Uneven fiscal capacity across similar States

🌐 Macroeconomic Implications

Rising debt → rating downgrades & investor caution

High revenue expenditure → crowds out capital investment

🚨 Emerging Issues

Off-budget borrowings & guarantees

Unsustainable power subsidies ⚡

Populist farm waivers

Climate adaptation costs 🌊🔥

🛠️ Reform Measures

Tax buoyancy: Digitisation & property tax reforms

Prioritise capital over revenue expenditure

Transparent accounting 📘

Strengthen GST Council & fiscal federalism 🤝

Finance Commission: Reward fiscal effort

🌱 Way Forward

Broaden State revenue base 💼

Encourage capital spending for growth

Monitor off-budget liabilities

Reduce vertical imbalance

⚖️ Conclusion Balancing welfare demand with fiscal prudence, expanding autonomy, and reforming debt practices is essential for sustainable & inclusive development in India.