Non-Believers Of Fiscal Prudence? States To Miss Budgetary Targets Due To Populist Measures
Non-Believers Of Fiscal Prudence? States To Miss Budgetary Targets Due To Populist MeasuresKarnataka Chief Minister H D Kumaraswamy after presenting state budget in Vidhan Soudha in Bengaluru. (Arijit Sen/Hindustan Times via GettyImages) 

ICRA report suggests that states may breach the fiscal deficit limits due to election expenses and populist measures which include farm loan waivers, Economic Times has reported . This comes in the wake of stringent measures taken by the centre to maintain fiscal discipline in spite of high crude oil prices.

"Given the factors such as funding of crop loan waivers, election-related spending and the flood relief will see the states miss their fiscal consolidation targets," the ICRA report said. The states’ fiscal deficits are funded through state development loans (SDLs).

This comes in spite of Reserve Bank of India estimate that said that the state’s fiscal deficit may go down to 2.6 per cent from 3.1 per cent based on budget estimates of the states. Further, it said that the states may face fiscal slippages if they don’t alter their capital expenditures.

"But a reduction in the capital spending will be an unfavourable outcome, which may impair the quality of expenditure. In contrast, higher-than-budgeted revenue, which is likely following the recent amendments related to IGST and GST compensation cess, and a back-ended pickup in headline SGST collections, will be an encouraging development," Jayanta Roy of ICRA highlighted the downside of reducing capital expenditure to contain fiscal deficit.

An Appeal...

Dear Reader,

As you are no doubt aware, Swarajya is a media product that is directly dependent on support from its readers in the form of subscriptions. We do not have the muscle and backing of a large media conglomerate nor are we playing for the large advertisement sweep-stake.

Our business model is you and your subscription. And in challenging times like these, we need your support now more than ever.

We deliver over 10 - 15 high quality articles with expert insights and views. From 7AM in the morning to 10PM late night we operate to ensure you, the reader, get to see what is just right.

Becoming a Patron or a subscriber for as little as Rs 1200/year is the best way you can support our efforts.

Become A Patron
Become A Subscriber