Analysing Indian States’ macro-fiscal health, Pg8

Key Highlights:

• The Comptroller and Auditor General (CAG) released a decadal analysis of Indian states' macro-fiscal health.
• Uttar Pradesh recorded a revenue surplus of ₹37,000 crore, exceeding Gujarat's surplus.
• States' fiscal stability relies on volatile sources like lotteries, mining royalties, and land sales.
• Andhra Pradesh's debt load swelled to 35% of its Gross State Domestic Product (GSDP) by 2023, and Bihar’s hovered around 39%.

Detailed Insights:

• States in the early 2000s were in deficit, but reforms and tax collection helped by the late 2010s, however the pandemic caused tax revenues to shrink while emergency spending soared.
• Maharashtra raised nearly 70% of its receipts internally in 2022-23, while Arunachal Pradesh managed only 9%, highlighting a vertical imbalance where richer states fund themselves and poorer ones rely on Union transfers.
• Kerala's lottery industry earned nearly ₹12,000 crore in 2022-23, Odisha drew 90% of its non-tax income from mining royalties, and Telangana sold land worth ₹9,800 crore.
• Rajasthan quadrupled its borrowings, from ₹43,889 crore in 2016-17 to ₹1,60,565 crore in 2022-23, while Uttar Pradesh slightly reduced borrowings, from ₹67,685 crore in 2016-17 to ₹66,847 crore in 2022-23.
• Some states depend on central transfers, off-budget loans, and delayed GST compensation, while others use free power and farm waivers, deferring costs into guarantees and special purpose vehicles.
• The nation has constructed one of the largest welfare states in the world while sustaining one of the thinnest fiscal bases among middle-income economies while being excessively dependent on borrowings.

Key Concepts Involved:

• Revenue Surplus: When a government's income exceeds its expenditures.
• Gross State Domestic Product (GSDP): A measure of the total value of goods and services produced within a state's borders.
• Fiscal Prudence: Responsible management of public finances, including controlling spending and debt.