According to a survey conducted by the foreign brokerage firm in 17 major states of the nation, Maharashtra has the best fiscal health. Meanwhile, one of the poorest states in the nation, Chhattisgarh, ranks second overall on the fiscal health scorecard.
The report was prepared by Kaushik Das, the chief economist at Deutsche Bank India.
West Bengal, Punjab, and Kerala were at the bottom and are considered as the states with the worst fiscal health. The report is based on the first budget estimates of the fiscal year 2023-24.Maharashtra is ranked first, as per the FY23 revised budget estimates, followed by Chhattisgarh, Orissa, Telangana, and Jharkhand. Gujarat dropped from fifth to seventh place and Andhra Pradesh from eighth to eleventh place in the FY23 rankings.
On the other hand, according to the budget data for fiscal year 2021-2022, Chhattisgarh was on top followed by Maharashtra, Orissa, Jharkhand, and Gujarat. The survey also stated that Punjab was at the bottom of the list, followed by Bengal, Kerala, Rajasthan, and Bihar back then.
Based on the four important fiscal metrics, a report is produced on the situation of the essential 17 states' finances. They are as follows:
Fiscal Deficit,
Own Tax Revenue,
State Debt Levels (All as a percentage of their individual gross state domestic product),
Interest Payment To Revenue Receipts.
Based on these four major parameters, Punjab, Bengal, Bihar, Rajasthan, and Kerala, are and will remain the most vulnerable to debt sustainability risks. In the report, they were at the bottom, being the ones having worst fiscal health, as they had weak fiscal and debt metrics even prior to the pandemic. The report further also added a June 2022 report by the Reserve Bank had also warned these states.
Maharashtra, Karnataka, Tamil Nadu, and Chhattisgarh often rank in the top quartile for these important states for a longer period of time, from fiscal years 2004 to 2016.
The budgetary dynamics of several of these states have been adversely affected by the demand for accommodative farm loan waivers, the restructuring of the debt in the power sector, an unprecedented COVID-19 shock, and other state-specific variables.
Bengal, Bihar, Uttar Pradesh, and Rajasthan frequently appeared in the bottom quartile from 2004 to 2016.
In the meantime, the budget deficit of these 17 states is projected to be around 3.3% of their GSDP in FY24, down from 3.7% in FY22. This should result in a general government debt/GDP of 85%, with the Centre's predicted debt/GDP for FY24 being 56.1%.
However, given that nominal GDP growth is expected to severely slow to 9–9.5% in the current fiscal from the double-digit nominal GDP growth achieved in the prior two fiscals, the research warns of a danger that the states' debt/GSDP ratio may be higher than the FY24 budget estimate.
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