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CareEdge Ratings Report Highlights Rise in State Fiscal Deficit to 3.3% of GSDP in FY25
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Author: TEXTILE VALUE CHAIN
CareEdge Ratings has released its latest Analysis of State Finances, outlining recent trends in fiscal deficit, debt levels, and borrowing patterns across Indian states. The report highlights that the aggregate state fiscal deficit increased to 3.3% of GSDP in FY25 compared with 2.9% in FY24, while aggregate state debt remained at around 28% of GSDP. It also notes changes in interest payments, capital outlay, and Centre-to-state resource transfers during the period under review.
Key Highlights:
- Aggregate state fiscal deficit rose to 3.3% of GSDP in FY25 (Vs 2.9% in FY24), while aggregate state debt was sticky at ~28% of GSDP.
- Aggregate interest payments as % of revenue receipts moderated to 12.2% in FY25 from 15% in FY21 aided by Centre’s interest-free capex loans.
- Centre’s transfer of resources to states (tax devolution, loans and grants) rose to 49% of aggregate revenue receipts in FY24-26 Vs pre-pandemic average of 45%, amid higher capex loans.
- States’ aggregate capital outlay as % total expenditure rose to 15.3% in FY25 from an average of 13.5% during FY10-19.
- Among large states, Odisha and Gujarat have a relatively better fiscal position while Punjab and Bihar lagged.
- Freebies announced in states such as Maharashtra, Odisha, Bihar, West Bengal and Jharkhand could pose a challenge for their finances.
- Amid slowing tax receipts, the anticipated pick-up in capex growth could exert pressure on the overall state finances in FY26.
- Aggregate state government borrowing was elevated at Rs 12.5 trillion in FY26, up 16.6% (y-o-y).
- Higher redemptions till FY31 are expected to keep state borrowings elevated.
Read Full Report Here: https://tvc.s3.ap-south-1.amazonaws.com/Analysis_of_State_Finances-2.pdf