States’ fiscal deficit may fall to 4.1% of GDP in FY22: Ind-Ra

The aggregate fiscal deficit of Indian states is expected to moderate to 4.1% of the gross domestic product (GDP) in this financial year, India Ratings and Research (Ind-Ra) said, lowering its forecast from the previous estimate of 4.3%.

The revenue receipts of state governments are expected to improve, backed by an economic recovery, resulting from a large section of the population receiving vaccinations, the agency said, adding that this would lead to states further easing restrictions on business and commercial activity.

“The agency now expects the aggregate revenue deficit of states to come in marginally lower at 1.3% of GDP in FY22 than the earlier forecast of 1.5% of GDP,” it said.


Ind-Ra said it had analysed information on 14 states – Chhattisgarh, Haryana, Jharkhand, Karnataka, Kerala, MP, Maharashtra, Odisha, Punjab, Rajasthan, TN, Uttarakhand, Telangana and UP – for the April-June quarter of the 2021-22.

“The impact of the second Covid wave on the economy notwithstanding, Ind-Ra estimates India’s nominal GDP to grow 15.6% in FY22, higher than its 10 February 2021 estimate of 14.5% in FY22,” it said.

The aggregate revenue receipts of these states grew 30.8% to Rs 3.95 lakh crore during the period, although it noted that the considerable improvement was due to a low base and revenue receipts growing 1.5% versus April-June quarter of 2019-20, in the pre-Covid-19 period.