Rising deficit and debt puts Indian states under fiscal strain: NSE Report

Rising fiscal deficit and debt in Indian states are causing financial strain, with many states facing unsustainable debt levels, especially post-pandemic. The NSE report highlights that the fiscal responsibility acts, meant to curb deficit levels, are proving insufficient as rising welfare spending, coupled with lower-than-expected revenue collection, exacerbates the crisis. States like Punjab and West Bengal are seeing deficits surpassing manageable thresholds. States with high debt loads may face constrained future growth, potentially needing to rely on central government assistance or face further downgrading of their credit ratings. With fiscal consolidation plans in place, it remains unclear how quickly states can recover. This escalating debt risk is now becoming a significant concern for policymakers, who are tasked with balancing welfare policies with financial sustainability.