Fiscal deficit of state’s to moderate to 4.1% of GDP

Indian states’ aggregate fiscal deficit is likely to moderate to 4.1% of GDP in the current financial year from4.3%, as expected earlier, according to India Ratings and Research. The agency expects that the aggregate debt to GDP ratio will come in lower at 32.4% in FY22. It had previously been estimated 34% by the agency.

The agency mentioned in the report that it expects the aggregate fiscal deficit of Indian states to moderate to 4.1% of the gross domestic product (GDP). With the economic recovery, the state governments, revenue receipts are expected to improve. This is due to the large section of the population receiving the vaccination jabs. It will further let states ease-out restrictions on business and commercial activity

The agency said, “We now expect the aggregate revenue deficit of states to come in marginally lower at 1.3% of GDP in FY22 than the earlier forecast of 1.5% of GDP.” The aggregate revenue receipts of 14 states analysed by the agency grew 30.8% to Rs 3.95 lakh crore during the period. In Q1 FY22, the revenue receipts grew 1.5% over the pre-Covid period of Q1 FY20, it said. The aggregate own tax and non-tax revenue receipt of 14 states grew 77 % Y-o-Y and 46% y-o-y, respectively, in Q1 FY22. This showed that the state’s revenue collection demonstrated resilience to the disruptions from the second Covid wave.

In FY’21 all states’ gross market borrowings were Rs 7.88 lakh crore. Due to an improvement in states’ aggregate revenue receipts during Q1 FY22, their aggregate market borrowing was lower at Rs 1.94 lakh crore than Rs 2.1 lakh crore in April-July 2020.

It is expected that the aggregate gross market borrowings of states will increase to Rs 8.2 lakh crore in FY22 compared to its previous estimate of Rs 8.4 lakh crore.

The net market borrowings would be Rs 6.2 lakh crore in FY’22 compared to Rs 6.45 lakh crore in FY21.