While the Reserve Bank of India has warned all states of the danger of fiscal management due to rising fiscal deficit and debt burden, the bank has expressed concern that the fiscal deficit of many states has increased to more than four percent of the gross state income. However, the financial situation of Maharashtra is comparatively satisfactory and in line with the figures expected by the bank.
The Reserve Bank of India's report on the financial systems of states was released recently. The bank has given earful to the states about the poor financial management. A clear advice has been given that people should avoid it. Even when the Reserve Bank expresses concern or advises to improve the economic situation, states do not seem to follow through.
The Reserve Bank has suggested that the fiscal deficit should be within the limit of three percent of the gross state income. Because many states have deficits of four percent or more. Fiscal deficit at the center level averages 3.1 percent. The bank has recommended efforts to reduce the deficit to this extent. Additional Chief Secretary (Finance) Nitin Karir said that the fiscal deficit in the state is in the range of three percent compared to the gross state income. He also expressed confidence that this deficit will be reduced to less than three percent in the revised budget by the end of this year.
The state can raise a loan of 1 lakh 20 thousand crores in a year. But this year the state government is going to raise a loan of 80 thousand crores.
The burden on the states will be four and a half times higher under the old pension scheme as compared to the new scheme. The Reserve Bank has warned the states that the financial management of the state will collapse due to this. It has also been advised that states should raise funds by selling their properties.
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Concerns about debt to states
The Reserve Bank has also expressed concern about the increasing debt burden on the states. The debt ratio of some states is more than 35 percent of the gross state income. The national average is 27.6 percent. It is considered that the ratio of debt should be within the limit of 25 percent of actual gross state income. Karir said that the debt ratio in Maharashtra is in the range of 18 percent of the gross state income. The ratio of debt to gross state income has remained around 16 to 18 percent over the past ten years. Although the debt burden of the state has gone up to seven lakh crores, according to the Reserve Bank standard, the debt ratio of the state is less compared to the gross state income.
The Reserve Bank has clearly warned the states not to implement the old pension scheme. So far, the old pension scheme has been implemented in some non-BJP-ruled states.Interestingly, while the Reserve Bank advised the states not to insist on the old pension scheme, in the ongoing winter session in Nagpur, both Deputy Chief Ministers Devendra Fadnavis and Ajit Pawar promised to think about implementing the old pension scheme in the state before the assembly elections.
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