{"id":250883,"date":"2023-07-05T20:30:54","date_gmt":"2023-07-05T15:00:54","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=250883"},"modified":"2023-08-31T14:18:42","modified_gmt":"2023-08-31T08:48:42","slug":"a-macro-view-of-the-fiscal-health-of-states","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/a-macro-view-of-the-fiscal-health-of-states\/","title":{"rendered":"A macro view of the fiscal health of States"},"content":{"rendered":"\n

Source:<\/strong> The post is based on the article \u201cA macro view of the fiscal health of States<\/strong>\u201d published in \u201cThe Hindu\u201d on 5th July 2023.<\/p>\n

Syllabus:<\/strong> GS 3 – Government Budgeting<\/p>\n

News:<\/strong> The article discusses the fiscal operations of the Indian states and highlights the importance of understanding state finances to improve country’s fiscal situation.<\/p>\n

Indian states mobilize over a third of total revenue, spend 60% of combined government expenditure, and have around 40% share in government borrowing. The basis of this analysis relies on the data collected from the budgets (2023-24) of 17 major States in India.<\/p>\n

What are the majors finding of this analysis?<\/strong><\/h2>\n

The general government deficit and debt, which increased during the COVID-19 pandemic, has started to recede.<\/p>\n

The Union level fiscal deficit declined from 9.1% of GDP in 2020-21 to 5.9% in 2023-24 (BE).<\/p>\n

All-State fiscal deficit was 4.1% of GDP in 2020-21, and it is expected to be 2.9% of GDP for the major States in 2023-24 (BE).<\/p>\n

These 17 major States contained their fiscal deficits despite revenue contraction during the peak of the COVID-19 pandemic.<\/p>\n

Factors that led the improvement in the fiscal situation<\/strong><\/p>\n

    \n
  1. Union-State fiscal coordination during Covid,<\/li>\n
  2. Expenditure-side adjustments,<\/li>\n
  3. improved GST collection,<\/li>\n
  4. higher tax devolution, and<\/li>\n
  5. recovery in non-GST revenues.<\/li>\n<\/ol>\n

    What are the remaining Fiscal challenges?<\/strong><\/h2>\n

    The reduction in the fiscal deficit has not been accompanied by a corresponding reduction in revenue deficit. Out of 17 major states, 13 states have a deficit in the revenue account in 2023-24 (BE).<\/p>\n

    The all-State share of revenue deficit in fiscal deficit for the same year is expected to be 27%.<\/p>\n

    The 12th Finance Commission identified three States, as fiscally stressed States, in term of revenue deficit. This number has increased to seven.<\/p>\n

    What should be done?<\/strong><\/h2>\n

    The focus should be brought back to the management of the revenue deficit. Following are some suggested measures:<\/p>\n

    Linking interest-free loans to States with a reduction in revenue deficit can prevent diversion of borrowed resources and incentivize fiscal discipline.<\/p>\n

    Implementing performance incentive grants based on revenue deficit reduction can further encourage fiscal balance and quality expenditure.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Source: The post is based on the article \u201cA macro view of the fiscal health of States\u201d published in \u201cThe Hindu\u201d on 5th July 2023. Syllabus: GS 3 – Government Budgeting News: The article discusses the fiscal operations of the Indian states and highlights the importance of understanding state finances to improve country’s fiscal situation.… Continue reading A macro view of the fiscal health of States<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,8184,10498],"class_list":["post-250883","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-indian-economy","tag-the-hindu","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/250883","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=250883"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/250883\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=250883"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=250883"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=250883"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}