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19/01/23 08:58 AM IST

States’ gross fiscal deficit set to fall in 2022-23: RBI

In News
  • The Gross fiscal deficit (GFD) of states is budgeted to narrow to 3.4 per cent of gross domestic product (GDP) in 2022-23 from 4.1 per cent in 2020-21, as per RBI report released recently.
Major Findings
  • The report titled "State Finances: A Study of Budgets of 2022-23" is a comprehensive analysis of the financial position of the Indian states, including the trends and challenges in their revenue and expenditure.
  • While states’ debt is budgeted to ease to 29.5 per cent of GDP in 2022-23 as against 31.1 per cent in 2020-21, it is still higher than the 20 per cent recommended by the FRBM Review Committee, 2018.
  • The report said that states have budgeted for higher revenue receipts in 2022-23, driven primarily by state goods and services tax (SGST), excise duties, and sales tax collections.
  • States’ capital outlay-GDP ratio is likely to improve from 2.3 per cent in 2021-22 (provisional account) to 2.9 per cent in 2022-23 (budget estimate).
  • In the current fiscal, states have budgeted higher capital outlay than in 2019-20, 2020-21 and 2021-22.
Suggestions
  • To crowd in private investment, state governments may continue to focus on creating a congenial ecosystem for the private sector to thrive.
  • This can be achieved by implementing policies and regulations that make it easy for private companies to do business, as well as providing incentives and support for private investment.
  • The states also need to encourage and facilitate higher inter-state trade and businesses to realise the full benefit of spillover effects of state capex across the country.
  • The report is proposing that it would be beneficial to establish a fund that would be used to buffer capital expenditure during periods of strong revenue growth.
Source- Indian Express

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