Indebtedness of states to remain elevated at 30-31% of GSDP in FY23: CRISIL
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CRISIL in its latest report has said that the aggregate indebtedness of states - measured by debt to gross state domestic product (GSDP) - is expected to remain elevated at 30-31% this fiscal (FY23), almost similar to 31.5% seen in fiscal 2022. It stated sticky revenue expenditure and the need for higher capital outlays, along with modest revenue growth, will keep borrowings up this fiscal.
That said, the Centre’s announcement last budget to provide special assistance of Rs 1 lakh crore to all states for capital spending will provide some respite. CRISIL’s study of the top 18 states, which account for 90% of the aggregate GSDP, shows that states borrow mainly to fund deficits on the revenue account and incur capital outlays.
Indebtedness had risen to a decadal high of 34% in fiscal 2021 (after remaining rangebound between 25-30% during fiscal 2016-2020) before cooling a tad to 31.5% in fiscal 2022. In fact, states saw a small surplus on the revenue account in fiscal 2022, owing to a healthy revenue growth of 25% on-year supported by healthy GST collections, strong devolutions from the central government, recovery in sales tax collections from fuel and support from central government through GST compensation loans.
