New Delhi: After a year of sharp growth, Indian states are expected to be largely flat in FY26, signaling the shift towards stricter fiscal discipline even in the middle of persistent pressure on social security expenses, according to two people who are with this matter.
After years of severe relying on borrowing outside the budget, which has been relying on the budget, which during the pandemic of the balloon with the center and states that tried to finance emergency expenses. Loans outside the state budget have increased £29 335 crore in FY25 from £21 251 Crore shows data about the Ministry of Finance a year ago.
In FY21, at the peak of expenditure related to Covid, such loans touched £67 181 crore.
“States have been said to promote fiscal discipline. Even access to 50 -year interest loans that are popular among states come up with conditions requiring greater financial caution,” said the first person on anonymity.
Many countries, as she said, are increasingly turning to special assistance to the Center for Capital Investment (Sasci), which provides long -term interest -free loans for infrastructure projects than to rely on budget loans mechanisms.
According to states, non -writing loans are likely to slow down in FY26, the person added.
The center itself ended borrowings outside the budget in FY23. Since FY22, it has tightened the rules for states by calculating the debt increased through state entities where repayment is supported by state budgets, taxes or other revenues, towards the total borrowing limits pursuant to Article 293 (3) of the Constitution.
States are aware of the injury of fiscal credibility
“States realize that excessive borrowings are undermined by fiscal credibility. Reining reining not only improve transparency and discipline, but also maintain space for future loans at lower costs,” said the above.
“In addition to the budget, the limitation of budgets also assures investors and credit agencies that states are serious regarding sustainable debt proceedings,” the person added.
There was no answer to questions to the Ministry of Finance spokesperson.
The recent Careedge Ratings report has noted that budgets of 13 major states, representing 83% of Indian GDP, are projecting aggregated fiscal deficit 3.2% of GDP in FY26, which is widely in line with the previous fiscal year.
The report also emphasized the sharp differences in the financial resistance of the states: richer states such as Haryana, Telangana, Karnataka, Tamil Nadu and Mahashtra, fund more than three quarters of their budgets through their own income, while states including Madhya Pradesh, West Bengal and Uttar Pradesh.
In the FY25 Maharashtra, the list of states relying on borrowings outside the budget on £13 990 crore, followed by Karnataka ( £5 438 crore), telangana ( £2 697 crore) and keral ( £983 crore), according to data from the Ministry of Finance.
In FY24, Maharashtra raised £7,700 crore through insignificant loans, followed by keral ( £4 688 crore), telangana ( £2 546 crore), paňjab ( £1 675 crore), tamil over ( £1 560 crore) and Assam ( £1,102 crore).
States often turn to borrowings outside the budget to finance social care and infrastructure programs without violating the targets of deficit or loans. Although it offers short -term flexibility, high loans are worried about transparency and fiscal discipline. Maintaining such loans under control will reduce debt pressures and help ensure that the wider consolidation plan of India remains credible.
Over the past five years, states have increased their open market loans. According to data on the Ministry of Finance, Mahashtra and Tamil lead the pack, each of which violates £1.2 Lakh Crore Mark in FY25, underlining the scope of state investment and expenditure priorities. Karnataka and Uttar Pradesh also noticed a significant increase. Smaller states, including those in the northeast, maintained modest loan profiles.
(Tagstotranslate) Indian states
