According to a Reserve Bank report States’ gross fiscal deficit (GFD) is budgeted to decline from 4.1 per cent of gross domestic product (GDP) in Covid-hit 2020-21 to 3.4 per cent of GDP in 2022-23 showing improvement in their fiscal health. The central bank also advised States to continue to focus on creating a congenial ecosystem for greater private investments.
The fiscal health of the states has improved from a sharp pandemic-induced deterioration in 2020-21 on the back of a broad-based economic recovery and resulting high revenue collections, said RBI’s Report titled ‘State Finances: A Study of Budgets of 2022-23’.
In 2022-23 States have budgeted higher capital outlay than in 2019-20, 2020-21 and 2021-22.
“Going forward, increased allocations for sectors like health, education, infrastructure and green energy transition can help expand productive capacities if States mainstream capital planning rather than treating them as residuals and first stops for cutbacks in order to meet budgetary targets,” the report said.