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Mahesh

22/06/22 08:02 AM IST

RBI says state debt levels unsustainable

In News 
  • The Reserve Bank of India (RBI) has cautioned that the fiscal conditions among states are showing warning signs of building stress, highlighting the need to undertake significant corrective steps to stabilise their debt levels.
States Debt 
  • Punjab: its debt-GSDP ratio is projected to exceed 45 per cent in 2026-27
  • Rajasthan, Kerala and West Bengal: projected to exceed the debt-GSDP ratio of 35 per cent by 2026-27. These states will need to undertake significant corrective steps to stabilise their debt levels.
  • Ten states accounting for half of the total expenditure in India are Punjab, Rajasthan, Kerala, West Bengal, Bihar, Andhra Pradesh, Jharkhand, Madhya Pradesh, Uttar Pradesh and Haryana.
  • Debt/GSDP ratio definition: It is a metric that shows what a state owes with what it produces. It indicates that particular state’s ability to pay back its debts.
Reason 
  • Among the ten states, Andhra Pradesh, Bihar, Rajasthan and Punjab exceeded both debt and fiscal deficit targets for 2020-21 set by the 15th Finance Commission.
  • It said the own tax revenue of some of these 10 states, viz., Madhya Pradesh, Punjab and Kerala, has been declining over time, making them fiscally more vulnerable.
  • For most of these states, non-tax revenue has remained volatile, dropping significantly in recent years.
  • The Reserve Bank of India (RBI) has cautioned that the fiscal conditions among states are showing warning signs of building stress, highlighting the need to undertake significant corrective steps to stabilise their debt levelsHigh committed expenditure: These include interest payments, pensions and administrative expenses, account for a significant portion (over 35 per cent) of the total revenue expenditure in states like Haryana, Uttar Pradesh, West Bengal, Kerala and Punjab, leaving limited fiscal space for undertaking developmental expenditure.
Source- The Hindu 

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