In India, the States mobilise altogether more than a third of total revenue, spend 60% of combined government expenditure, and have a share in government borrowing that is around 40%. Given the size of the fiscal operation of States, an up-to-date understanding of their finances is critical in order to draw evidence-based inferences on the fiscal situation of the country — in short, an analysis of the emerging fiscal situation of States by examining key data on State finances from individual State budgets for 2023-24.
Fiscal imbalance and consolidation
As we complete the first quarter of the fiscal year 2023-24, it is becoming evident that the increase in general government deficit and debt that occurred during the COVID-19 pandemic has begun to recede. There have been significant post-pandemic fiscal corrections at the Union and State levels. At the Union level, the fiscal deficit declined from 9.1% of GDP in 2020-21 to 5.9% in 2023-24 (BE). All State fiscal deficit was 4.1% of GDP in 2020-21. It declined to 3.24% of GDP in 2022-23 (RE). For the major States, for the year 2023-24 (BE), it is expected to be 2.9% of GDP.
