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State Finances in India - Analysis of Budget 2022-23 of Major States

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  • Mukherjee, Sacchidananda

Abstract

After two consecutive years (2019-20 and 2020-21) of fiscal stress, state finances in India show sign of improvement in 2021-22RE. With rising economic growth, revenue mobilization has improved which helped states to increase expenditures during 2021-22. To cope up with the revenue stress and rein in deficits and debts, states have contained growth in expenditures during 2019-21. Despite all efforts consolidated fiscal deficit of 18 major states went up from 2.49% of aggregate GSDP in 2018-19 to 2.56% in 2019-20 and 3.89% in 2020-21. Consolidated public debt of 18 states increased from 19.66% of GSDP in 2018-19 to 20.53% in 2019-20 and 23.04% in 2020-21. States received GST compensation from the GST compensation fund which helped them to contain revenue and fiscal deficits. States also received back-to-back loans in lieu of shortfall in GST compensation fund from the Centre during 2020-21 and 2021-22 which helped them to contain public debt. Given the growth prospects of GSDP in 2022-23, overall revenue side of State Budgets 2022-23 seems realistic as states have set cautious targets in revenue mobilization. It is also to be highlighted that states have taken into account fiscal implications of the end of GST compensation regime in the budget estimates of 2022-23. States have resumed following the path of fiscal consolidation post COVID-19 pandemic. Successes in achieving revenue as well as expenditures targets set in the budget of 2022-23 could help states to control deficits and debts.

Suggested Citation

  • Mukherjee, Sacchidananda, 2022. "State Finances in India - Analysis of Budget 2022-23 of Major States," MPRA Paper 113955, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:113955
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    File URL: https://mpra.ub.uni-muenchen.de/113955/1/MPRA_paper_113955.pdf
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    References listed on IDEAS

    as
    1. Rao, R Kavita, 2022. "GST, End of Compensation Regime and Stress on State Finances," Working Papers 22/376, National Institute of Public Finance and Policy.
    2. Mukherjee, Sacchidananda & Badola, Shivani, 2021. "Public Finance Management in India in the time of COVID-19 Pandemic," Working Papers 21/337, National Institute of Public Finance and Policy.
    3. Mukherjee, Sacchidananda, 2021. "Revenue Shortfall and GST Compensation: An Assessment," Working Papers 21/356, National Institute of Public Finance and Policy.
    4. Choudhury, Mita & Datta, Pritam, 2022. "The "Scissors Effect" of COVID 19 Pandemic on State Finances: Emerging Evidence on Expenditures," Working Papers 22/369, National Institute of Public Finance and Policy.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    State Finances; budget analysis; fiscal management; revenue mobilization; public finance management; public debt; fiscal deficit; revenue deficit; India.;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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