{"id":34079,"date":"2024-12-21T18:43:36","date_gmt":"2024-12-21T13:13:36","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=34079"},"modified":"2024-12-21T18:43:37","modified_gmt":"2024-12-21T13:13:37","slug":"state-finances-a-study-of-budgets-2024-25","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/21-12-2024\/state-finances-a-study-of-budgets-2024-25","title":{"rendered":"State Finances: A Study of Budgets of 2024-25"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Reserve Bank of India (RBI) released the Report \u201cState Finances: A Study of Budgets of 2024-25\u201d.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Major Highlights<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>GFD of States:<\/strong> State governments contained their consolidated gross fiscal deficit (GFD) within 3% of gross domestic product (GDP) and their revenue deficit at 0.2% of GDP during 2022-23 and 2023-24.\n<ul class=\"wp-block-list\">\n<li>In 2024-25, States have budgeted a GFD of 3.2% of GDP.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Expenditure:<\/strong> Capital expenditure rose from 2.4% of GDP in 2021-22 to 2.8% in 2023-24 and budgeted at 3.1% of GDP in 2024-25.<\/li>\n\n\n\n<li><strong>Liabilities:<\/strong> States&#8217; total outstanding liabilities declined from 31.0% of GDP 2021 to 28.5% in 2024 but remain above the pre-pandemic level.<\/li>\n\n\n\n<li><strong>State-specific Fiscal Responsibility Legislations (FRLs)<\/strong> along with tax and expenditure reforms have strengthened their finances over the past two decades.\u00a0<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Reasons for Lack of Fiscal Prudence in States:<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Expenditure on Schemes:<\/strong> Sharp rise in expenditure on subsidies, driven by farm loan waivers, free\/subsidised services and cash transfers to farmers, youth and women.\u00a0<\/li>\n\n\n\n<li><strong>Lack of Flexibility to States:<\/strong> Too many Central government schemes reduce flexibility of State government spending and dilute the spirit of cooperative fiscal federalism.\u00a0<\/li>\n\n\n\n<li><strong>Lack of Data Availability:<\/strong> Timely availability of reliable and comprehensive data is crucial for fiscal risk assessment of States.\n<ul class=\"wp-block-list\">\n<li>Certain definitions in States\u2019 FRLs are often inconsistent with those of the Finance Commissions, the Union Ministry of Finance, and the Reserve Bank.<\/li>\n\n\n\n<li>It led to ambiguities in reporting, differential treatments of public account items, non-uniform nomenclature, and underreporting of debt liabilities.\u00a0<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Lack of Uniform Reporting:<\/strong> Uniform reporting of contingent liabilities and off-budget borrowings by States is important.\u00a0<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Recommendations for States:\u00a0<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Rationalise Subsidies:<\/strong> States need to rationalise their subsidy outgoes, so that such spending does not crowd out more productive expenditure.\u00a0<\/li>\n\n\n\n<li><strong>Rationalisation of centrally sponsored schemes (CSS)<\/strong> can free up budgetary space to meet State-specific expenditure needs and reduce the fiscal burden of both the Union and the State governments.\u00a0<\/li>\n\n\n\n<li><strong>Policy Framework for Debt Consolidation:<\/strong> States with elevated debt levels may establish a clear and transparent path for debt consolidation that is aligned with macroeconomic objectives.\u00a0<\/li>\n\n\n\n<li><strong>Reporting off-budget Borrowings: <\/strong>Consistent reporting of off-budget borrowings would enhance fiscal transparency and discipline with potential benefits like lower borrowing costs.<\/li>\n\n\n\n<li><strong>Strengthening of State Finance Commissions<\/strong> is also critical for ensuring adequate and timely fund transfers to local bodies.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Conclusion<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Overall, while the State governments have made progress in fiscal consolidation, there is scope for further improvement in expenditure efficiency.<\/li>\n\n\n\n<li>Concerted efforts by States will pave the way for higher economic growth with macroeconomic stability.<\/li>\n<\/ul>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/www.thehindu.com\/business\/rbi-asks-states-to-have-sustained-fiscal-prudence\/article69005749.ece#:~:text=State%20governments%20contained%20their%20consolidated,its%20report%20on%20state%20finances.\" target=\"_blank\" rel=\"noopener\"><strong>TH<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Reserve Bank of India (RBI) released the Report \u201cState Finances: A Study of Budgets of 2024-25\u201d.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-34079","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/34079","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=34079"}],"version-history":[{"count":1,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/34079\/revisions"}],"predecessor-version":[{"id":34080,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/34079\/revisions\/34080"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=34079"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=34079"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=34079"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}