The pandemic has worsened the fiscal positions of State governments. Declining tax revenue, a high share of committed expenses (interest payments, pensions, administrative expenses etc.,) and rising subsidy burdens meant that States were overtly dependent on Central transfers. A decline in revenue and an increase in spending meant a sharp rise in debt. Punjab, Rajasthan, Kerala, West Bengal, Bihar, Andhra Pradesh, Jharkhand, Madhya Pradesh, Uttar Pradesh and Haryana had the highest debt burden in 2020-21. The revenue expenditure of many of these States constitute 80-90% of the total expenses and therefore they have poor capital spending.
Fiscal deficit and debt target
Andhra Pradesh, Bihar, Rajasthan and Punjab exceeded both debt and fiscal deficit targets for 2020-21 set by the 15th Finance Commission. Kerala, Jharkhand and West Bengal exceeded the debt target, while Madhya Pradesh overshot the fiscal deficit target
