State Finances in India: Managing Fiscal Risks and Sustaining Recovery

Pinaki Chakraborty () and Kausik K. Bhadra ()
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Pinaki Chakraborty: National Institute of Public Finance and Policy

Working Papers from National Institute of Public Finance and Policy

Abstract: In India, there have been significant post-pandemic fiscal corrections at both the Union and State levels. Our analysis shows that excessive fiscal corrections by some States coupled with the emergence of revenue deficits resulted in a situation of underutilisation of fiscal space and lower capital expenditure than its potential at the State level. However, many fiscal risks remain. Some of the major risks include increasing off-budget operations by the States. The study noted that future bailout of DISCOMs may significantly reduce fiscal space for development spending at the State level. The study conclude that State-specific fiscal risks need appropriate policy considerations to enable sustainable fiscal recovery.

Pages: 19
Date: 2024-06
Note: Working Paper 413, 2024
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