States’ fiscal deficit jumped by 78% after lockdown: RBI

Source: The post is based on the article “States’ fiscal deficit jumped by 78% after lockdown: RBI” published in Livemint on 20th November 2022

What is the News?

Reserve Bank of India has released the seventh edition of its statistical publication titled “Handbook of Statistics on Indian States 2021-22”. 

What are the key highlights from the RBI data?

State’s Fiscal Deficit: The Gross Fiscal Deficit of the Indian states rose nearly 78% after the lockdown in FY21.

– The Fiscal Deficit increased from Rs 5.2 trillion in FY20 to Rs 9.3 trillion in 2020-21 (FY21). In FY22, the deficit fell to Rs 8.1 trillion but stood much higher than the pre-pandemic level.

– Except for Arunachal Pradesh, Haryana, Sikkim and Odisha, all the states saw a higher fiscal deficit in FY21 as compared to FY20.

– In FY21, the highest fiscal deficit was recorded in Tamil Nadu followed by Maharashtra and Uttar Pradesh.

Note: A fiscal deficit is a difference between the state’s revenue and spending. It shows the shortfall in revenue.

States Tax revenue: Karnataka, Kerala, Madhya Pradesh and Maharashtra witnessed a marginal decline in their tax revenue receipts in FY21. The highest fall in own tax revenue was seen in Kerala.

Centre’s Fiscal Deficit: In the case of the Centre, the fiscal deficit jumped from 4.6% in FY20 to 9.3% of the Gross Domestic Product (GDP) in FY21.

Note: In the Union Budget 2022-23, Rs 1 trillion was allocated as interest-free 50-year Capex loans for states to be spent on new or ongoing projects. This included projects like Gati Shakti, the PM Gram Sadak Yojana and digitization.