Key Trends and Issues in India’s State Finances
Ms Pandey discussed the state deficits in an aggregated manner, focusing on the impact of the COVID-19 pandemic. During the pandemic, the overall state deficit soared to 4.1%, primarily due to a sharp decline in revenues and an increase in state expenditures. It's worth noting that the Fiscal Responsibility and Budget Management Act (FRBM) mandates that the fiscal deficit should be limited to 3% of GDP. However, in the fiscal year 2020-21, states were unable to meet this target and had a fiscal deficit of 4%. Even the central government's fiscal deficit rose to 9% during that period.
