Credit ratings agency India Ratings & Research (Ind-Ra) in its latest report has said that States are likely to miss Debt/GDP Target on the back of expansionary fiscal policy and slow economic growth. The agency noted that aggregate states’ fiscal deficit slippage to 2.9% of GDP in FY19 revised estimate (RE), from 2.6% in FY19 budget estimate (BE) is mainly due to an expansionary fiscal policy followed by the state governments.
As per Ind-Ra, meeting the N.K. Singh panel’s recommended level of aggregate debt burden at 20% of GDP by FY23 will be a challenge in an economic environment characterised by slow growth and weak demand, despite the significant fiscal consolidation during 2014-19.
The rating agency listed the 9 states where slippage in fiscal deficit was most significant--Andhra Pradesh, Arunachal Pradesh, Bihar, Chhattisgarh, Gujarat, Jammu and Kashmir, Manipur, Mizoram and West Bengal. These states collectively increased their fiscal deficit by more than 24% in FY19 (RE) over FY19 (BE).