An autonomous research institute under the Ministry of Finance


State Finances in India: Managing Fiscal Risks and Sustaining Recovery

Publication date

Jun, 2024


NIPFP Working Paper No. 413


Pinaki Chakraborty and Kausik K. Bhadra


In India, there have been significant post-pandemic fiscal corrections at both the Union and State levels. Our analysis shows that excessive fiscal corrections by some States coupled with the emergence of revenue deficits resulted in a situation of underutilisation of fiscal space and lower capital  expenditure than its potential at the State level. However, many fiscal risks remain. Some of the major risks include increasing off-budget operations by the States. The study notes that future bailout of DISCOMs may significantly reduce fiscal space for development spending at the State level. The study concludes that Statespecific fiscal risks need appropriate policy considerations for sustainable fiscal recovery. 
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