States' finances deteriorated owing to Covid-19 pandemic: RBI bulletin
According to an article published by the Reserve Bank of India (RBI) in its June 2022 monthly bulletin, fiscal health of states deteriorated sharply owing to Covid-19 pandemic. States’ tendency towards handing out cash subsidies, provision of free utility services, revival of the old pension scheme and extension of implicit and explicit guarantees have put them in a difficult position. Bihar, Kerala, Punjab, Rajasthan and West Bengal are among the most stressed states. The authors of the article have projected the debt-gross state domestic product (GSDP) to moderate between 2021-22 and 2026-27. According to them, Punjab will remain in worst position with its debt-GSDP ratio projected to exceed 45 per cent in 2026-27, while Rajasthan, Kerala and West Bengal are projected to exceed 35 per cent. As per the article, these states need to undertake significant corrective steps to stabilise their debt levels.