Macro-financial health of Indian states

• India’s states exhibit diverse fiscal situations, with Maharashtra raising 70% of its receipts internally and Arunachal Pradesh only 9%.

• Uttar Pradesh reported a significant revenue surplus of ₹37,000 crore, but relies heavily on central transfers, indicating that reported surpluses may not reflect true fiscal health.

• Many states face high levels of borrowing due to increased spending during the pandemic, with Andhra Pradesh tripling its borrowings to ₹1.86 lakh crore and Bihar doubling it.

• Variations in borrowing practices highlight a vertical imbalance where richer states are self-sufficient, while poorer states depend on central government funds.

• Volatile revenue sources, such as lotteries and mining royalties, contribute to an unstable financial outlook for several states, raising concerns about long-term sustainability.

• Post-pandemic fiscal strategies differ; some states have increased borrowings, while others have reduced them, indicating varied approaches to managing fiscal health.

• A welfare paradox exists, with states expanding welfare spending despite constrained revenues and high debt levels, creating a façade of well-being amid fiscal fragility.

Indian States Economy is important topic for Civil service exam (WBCS).

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