Fiscal deficit of 21 states to be higher than Finance Commission limit of 3% in FY25: NSE study

Fiscal deficit likley to be higher than finance commission limit in FY25

Fiscal deficit of 21 states will be higher than the three percent limit prescribed the Fifteenth Finance Commission, according to an analysis of 21 state Budget by the National Stock Exchange released on October 16.

The report titled “State of States” found that the fiscal deficit is only expected to ease to 3.2 percent in FY25 compared with 3.5 percent as per revised estimates of the previous fiscal year.

The fiscal deficit remained at 2.8 percent for FY22 and FY23.

Madhya Pradesh and Himachal Pradesh are likely to experience fiscal deficits of over four percent in FY25, while five other states are expected to experience deficits of over 3.5 percent.

States' revenue receipts will likely rise in double digits for a fourth consecutive year. They are expected to increase by 10.6 percent in FY25 over the previous year’s revised estimates, easing from the 15.9 percent growth witnessed in FY24.

Both tax and non-tax revenue growth is expected to slow down in the current fiscal.

More important, capital spending, which has stayed above 30 percent for the previous two fiscals, is expected to increase drastically to 6.5 percent.