According to RBI, Bihar, Kerela, Punjab, Rajasthan and West Bengal are the most financially stressed state in India.
Highlights
- Bihar, Punjab, Kerela, Rajasthan and West Bengal are financially stressed state
- RBI is conducting studies to help these states to get back to their feet.
Reserve Bank of India started the financial analysis of all the states after the crisis hit Sri Lanka. RBI found that the covid-19 pandemic had a major impact on the finance of some states.
According to the reports, Bihar, Kerela, Punjab, Rajasthan and West Bengal are the states that are most affected financially by the covid-19 pandemic.
Of the 5 states, Punjab seems to be in the most peculiar situation. Usually, the state spends around 10% of revenue receipt on interest payments but Punjab is paying more than 20%.
According to RBI, the stressed state’s share of revenue expenditure in total expenditure is around 80% which is considerably high. With almost no resources, the state will invest less in capital expenditure or asset creation.
The reason behind RBI’s concern
RBI has been stressing the fact that these 5 states (Bihar, Kerela, Punjab. Rajasthan and West Bengal) are getting a fiscal deficit each year and these are the reasons.
Bihar
- Its economy is expected to increase around 9.7% this year (around 7.45 lakh crore).
- State’s debt is increasing faster than expected.
- A debt of Rs 2.88 lakh crore in the current year is around 70% more than it was n 2018-2019.
- Capital expenditure is actively decreasing as the debt piles on further.
Kerela
- Its economy is expected to increase around 10.8% this year (around 10 lakh crore).
- Its economy took a huge blow from the second successive year of flooding.
- Its debt increased to 3.71 lakh crore, which is an increase of 58% from 2018-2019.
- Outstanding debt is around 277% of the ratio of revenue receipts.
Punjab
- Punjab was among the top 5 states in terms of GDP for years but it has felled to 16th place in 2020-2021.
- It’s in huge debt as outstanding debt is around 2.63 lakh crore and this is not all it has to pay a debt of Rs 55,000 crore state debt as well.
- The GST compensation cess would set the state another debt of around Rs 14000-15000 crore.
Read more: – What is the financial position of the 5 states described as stressed by RBI?
