The RBI said in its report that states need to take steps to address concerns about rising debt.
The countries’ debt-to-GDP ratio is expected to remain at 31% by the end of the current fiscal, well above the 20% target to be reached in the next fiscal, i.e. 2022-23.
This was reported by the Reserve Bank of India (RBI) in its annual publication of state budgets for 2021-22.
The report notes that the debt-to-GDP ratio remains above the 20% target for the next fiscal, a worrying trend.
The central bank noted in the report that as the impact of the second wave of the coronavirus pandemic eases, state governments need to take credible steps to address debt sustainability concerns. .
The states’ debt-to-GDP ratio was at 31% at the end of March 2021 and is expected to stay there through the end of March 2022, worryingly above the target. 20% will be achieved by 2022-23, as recommended by the FRBM review committee,” it said.
In light of the pandemic forecast, the 15th Finance Committee expects the debt-to-GDP ratio to peak at 33.3% in 2022-23 (against a higher deficit in the 2020s). -21, 2021-22 and 2022-23), and then gradually decrease to 32.5% in 2025-26.
The RBI further observes that the aggregate fiscal deficit (GFD) of 3.7% of GDP for the states for 2021-22 is lower than the 4% recommended by the Finance Committee 15. This said, this reflects the intentions of the state governments towards fiscal consolidation.
According to the report, in the medium term, improvements in the financial position of state governments will depend on reforms in the electricity sector as recommended by the Finance Committee and designated by the Center as generating providing electricity subsidies to farmers in a transparent and hassle-free manner. , prevent leaks and improve the financial health of power distribution companies.
