This quantity, which is greater than double of Gujarat’s surplus, was hailed as proof that India’s most populous State had turned a nook. However, by merely focussing on the quantity, one missed the larger image. Narrowing down on simply arithmetic surpluses could also be limiting analytical interpretation if not studied extra holistically with the shape, operational mechanics and selections made for a State’s governance.
Economists usually urge larger capital spending for progress, whereas maintaining routine prices in verify. These numbers resolve whether or not one’s neighbourhood hospital has new ventilators; whether or not a college will get sufficient lecturers; and whether or not village roads might be repaired this yr. India’s States run a few of the largest budgets on the earth — greater in actual phrases than many nations. Cumulatively, owing to the constitutional separation of powers, they spend greater than the Union authorities on well being and welfare. One should ask although: do States earn sufficient to pay their payments? Or are they borrowing?
Uneven income
In the early 2000s, States have been usually deep in deficit, spending rather more than they earned. Reforms, higher tax assortment, and booming progress helped many flip the nook by the late 2010s, with a number of even reporting surpluses. But the pandemic was a turning level — tax revenues shrank whereas emergency spending soared, pushing virtually each State again. Today, the image is blended. While some States seem snug, a lot of their stability rests on unstable sources reminiscent of lotteries, mining royalties or land gross sales.
India’s States inhabit starkly completely different fiscal worlds, very similar to its numerous ethno-linguistic identities. Maharashtra raised almost 70% of its receipts internally in 2022-23, whereas Arunachal Pradesh managed solely 9%. Uttar Pradesh, regardless of a surplus, generated simply 42% by itself, counting on Union transfers. In financial phrases, that is known as a vertical imbalance — wealthy States fund themselves, whereas poorer ones lean on Delhi.
Kerala’s lottery business earned almost ₹12,000 crore in 2022-23; Odisha drew 90% of its non-tax revenue from mining royalties; and Telangana offered land price ₹9,800 crore. However, lotteries hinge on gross sales, royalties on world costs, and land can’t be offered twice.
Gross debt borrowings
Let’s analyse the numbers from the CAG’s decadal evaluation report. When States spend greater than they earn, they have an inclination to borrow extra. They finance that deficit primarily by means of loans or bonds that have to be repaid with curiosity. The CAG, by means of its audited State Finances reviews, brings us a consolidated nationwide image, whereas the RBI’s State Finances: A Study of Budgets report gives a constant framework for comparability. Taken collectively, these sources present that borrowing patterns between 2016-17 and 2022-23 have diverged sharply in India.
Table 1 offers with States reminiscent of Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Chhattisgarh and Goa. Andhra Pradesh tripled its borrowings to ₹1.86 lakh crore, whereas Bihar doubled it, making debt a routine software even for poorer States. By distinction, Goa saved a decent lid on borrowings, standing out as a uncommon conservative. Yet the liabilities information reveals the load of those selections: Andhra Pradesh’s debt load swelled to 35% of its Gross State Domestic Product (GSDP) by 2023, and Bihar’s hovered round 39%, among the many highest in India. Assam’s fast borrowing was cushioned by progress, with liabilities easing barely to 22% of GSDP, whereas Goa stayed at 27%, nonetheless excessive for a small State.
Table 2 offers with Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Kerala, and Madhya Pradesh. Here, borrowings rose in a measured however persistent means. Haryana jumped from ₹28,170 crore in 2016-17 to ₹80,649 crore in 2022-23, almost tripling its borrowings regardless of being one of many richer States; its liabilities additionally climbed to about 31% of GSDP. Gujarat moved step by step upward, from ₹27,668 crore to ₹52,333 crore, whereas maintaining its debt burden regular close to 19-20% of GSDP. Madhya Pradesh additionally virtually doubled its borrowings, from ₹29,847 crore to ₹58,867 crore, with liabilities rising to round 29%.
The pandemic introduced volatility. Karnataka’s borrowings spiked to ₹84,828 crore in 2020-21, earlier than being in the reduction of to ₹44,549 crore; even after retrenchment, its liabilities stood shut to twenty-eight% of GSDP. Kerala peaked at ₹69,735 crore and later eased to ₹54,007 crore, although its debt burden stayed stubbornly excessive, at roughly 37% of GSDP. Smaller States remained modest — Himachal Pradesh’s liabilities reached virtually 48% of its GSDP, whereas Jharkhand’s borrowings hovered between ₹7,000–₹13,500 crore with a steadier load of 27% of GSDP.
Table 3 offers with Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, and Punjab. This cluster highlights extremes. Maharashtra borrowings bulged from a low of ₹26,025 crore in 2018-19 to a surge of ₹1,18,516 crore in 2020-21, earlier than moderating to ₹94,702 crore in 2022-23. However, its giant economic system saved the debt burden contained at round 20% of GSDP. Punjab remained persistently excessive, with borrowings ranging between ₹83,627 crore in 2016-17 and ₹89,544 crore in 2022-23; its liabilities climbed to about 45% of GSDP, exhibiting power stress. Odisha bucked the development, chopping borrowings from ₹11,223 crore to only ₹5,347 crore because of mining windfalls, and its liabilities fell to just about 15% of GSDP, the bottom in India.
Manipur’s borrowings grew from ₹1,551 crore to ₹11,116 crore; Meghalaya from ₹1,210 crore to ₹6,221 crore; Mizoram from ₹756 crore to ₹4,019 crore; and Nagaland from ₹5,444 crore to ₹7,159 crore. Though small in absolute numbers, these States carry a few of the heaviest burdens, with liabilities starting from about 40-60% of GSDP, marking rising fiscal dependence.
Table 4 showcases Rajasthan, Sikkim, Tamil Nadu, Telangana, Tripura, Uttar Pradesh, Uttarakhand, and West Bengal. Rajasthan and Tamil Nadu emerged as heavy debtors. Rajasthan quadrupled its borrowings, from ₹43,889 crore in 2016-17 to ₹1,60,565 crore in 2022-23, one of many steepest climbs nationwide, and its liabilities climbed to about 40% of GSDP. Tamil Nadu moved steadily upward from ₹66,143 crore to ₹1,01,062 crore, whereas its debt ratio rose to round 33%. Telangana surged from ₹44,819 crore to ₹1,26,884 crore, although sturdy progress saved its liabilities average at about 28%.
West Bengal confirmed average progress, from ₹37,524 crore to ₹70,243 crore, with liabilities remaining excessive at 37% of GSDP. In distinction, Uttar Pradesh barely decreased borrowings, from ₹67,685 crore in 2016-17 to ₹66,847 crore in 2022-23, holding its liabilities regular at about 31%. Uttarakhand’s borrowings additionally dipped from ₹10,592 crore to ₹9,431 crore, however liabilities have been nonetheless over 32% of GSDP, whereas Tripura shrank from ₹1,140 crore to only ₹877 crore however carried a debt load above 30%. Sikkim remained marginal all through, underneath ₹2,100 crore, although its debt stood at about 24% of GSDP.
Borrowings spiked in all places throughout the pandemic. But what occurred afterwards differed: some States like Andhra Pradesh, Rajasthan, and Telangana saved rising their borrowings; Karnataka, Kerala, and Maharashtra in the reduction of; and some like Odisha, Uttar Pradesh, and Tripura decreased their borrowings even additional, revealing very completely different fiscal methods.
The welfare paradox
While some States present surpluses, in actuality, they lean closely on central transfers, off-budget loans, and delayed GST compensation. Quite a lot of these States aren’t sufficiently spending on welfare priorities and so any reported surplus could have accounting good points with out developmental good points. Also, States like Punjab wrestle with power debt; Kerala depends on unstable revenues from lotteries; whereas Andhra Pradesh and Uttar Pradesh, by means of free energy and farm waivers, see their prices deferred into the opaque equipment of ensures and particular function autos.
Corporate tax cuts, GST cesses, and rebranded social spending masks the true burden, leaving fiscal prudence a mirage. With the current GST rejig and a better fiscal income loss anticipated, one can hardly know its broader impression on fiscal spending by States on their already frugal welfare budgets. Yet, inside this fragility, welfare schemes in some centralised funding schemes have proliferated: PM-KISAN deposits, Ujjwala cylinders, and Ayushman Bharat playing cards flow into like tokens of political theatre in projecting the ruling dispensation and its chief because the face of India’s welfare populist base.
It is exactly this stress, of a State that spends lavishly whereas its revenues pressure, that frames India’s present welfare paradox. The nation has constructed one of many largest welfare states on the earth whereas sustaining one of many thinnest fiscal bases amongst middle-income economies whereas being excessively depending on borrowings. The paradox displays a nation-state projecting extraordinary promise, with constrained and inhibitive fiscal capability, the place, a spectacle of care is constructed getting ready to fiscal shortage.
Deepanshu Mohan is Professor and Dean, O.P. Jindal Global University (JGU)and Visiting Professor, LSE and Research Fellow, University of Oxford. Geetaali Malhotra and Aditi Lazarus, analysis analysts with CNES, JGU respectively, contributed to this text.
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