The financial health of States seems to be improving gradually, with the overall gross fiscal deficit expected to reduce to ₹4,86,500 crore in 2018-19 from ₹5,14,320 crore in 2017-18.
According to the fourth edition of the RBI’s Handbook of Statistics on Indian States — 2018-19, this will be the second year in a row of a declining gross deficit. States’ gross fiscal deficit had gone up for seven straight years from 2010-11.
Bihar and Assam are expected to see the biggest decline in their fiscal deficit numbers. While Bihar’s deficit is expected to fall from ₹34,960 crore (Revised Estimate for 2017-18) to ₹11,200 crore (Budget Estimate for 2018-19), Assam’s numbers are set to improve from ₹36,600 crore to ₹9,770 crore.
Andhra Pradesh and Punjab are also among the States whose fiscal deficit is projected to decline.
Madhya Pradesh and Maharashtra, where the farm-loan waiver has become a drag on the State governments’ finances, are expected to see an increase in their fiscal deficit.
On another positive note, the States are expected to close 2018-19 with net receipts exceeding projections.
A revenue deficit arises when the government’s actual net receipts are lower than the projected receipts.
According to the RBI, all States are expected to see a revenue deficit of –(minus)₹2,920 crore in 2018-19, compared to a shortfall of ₹61,080 crore in 2017-18, thanks to net receipts being higher than projected receipts.
Such an increase was last reported in 2012-13.