RBI Report on State Finances for 2022-23: Fiscal Health Improves but Debt Consolidation Still Needed

The Reserve Bank of India (RBI) has released a report titled “State Finances: A Study of Budgets of 2022-23” which provides information and analysis on the finances of Indian state governments for the 2022-23 fiscal year. The report highlights that the fiscal health of the states has improved from the sharp deterioration caused by the pandemic in 2020-21, due to a broad-based economic recovery and resulting high revenue collections. The report states that states’ gross fiscal deficit is budgeted to decline from 4.1% of GDP in 2020-21 to 3.4% in 2022-23. However, states’ debt is still higher than the 20% recommended by the FRBM Review Committee, 2018, warranting prioritization of debt consolidation. The report also suggests that increased allocations for sectors like health, education, infrastructure, and green energy transition can help expand productive capacities and to crowd in private investment, the state governments may continue to focus on creating a congenial ecosystem for the private sector to thrive. [rbi.org.in]