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    Four large states report revenue deficit budgets; experts weigh in impact

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    Four large states report revenue deficit budgets; experts weigh in impact

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    Four of the the largest states -- Maharashtra, Tamil Nadu, Karnataka and Uttar Pradesh-- have reported revenue deficit budgets. A clear sign that the COVID-19 pandemic and the lockdown have taken a toll on the state coffers.

    Four of the the largest states -- Maharashtra, Tamil Nadu, Karnataka and Uttar Pradesh-- have reported revenue deficit budgets. A clear sign that the COVID-19 pandemic and the lockdown have taken a toll on the state coffers. However, this is not a bolt from the blue.
    In its report, the 15th Finance Commission had warned about rising debt levels and shrinking revenue due to the pandemic.
    The Commission had projected combined fiscal deficit of states to rise from 2.5 percent to 4.5 percent this year. In fact, the Commission expected fiscal deficit to remain elevated for a few years and only reduce to 3 percent by FY26. Even this will be higher than 2.5 percent level in FY19.
    In fact in October the Reserve Bank of India (RBI) had also raised a red flag and warned that the financial position of states will hamper growth of the economy.
    RBI had said, "In this situation state governments may have to face the difficult choice of putting investment projects on hold, but, given the multiplier associated with capital spending, this will inevitably entail growth losses in a vicious circle feeding itself."
    To discuss the state of the states and the road ahead, Shereen Bhan spoke to Yamini Aiyar, president & chief executive at Centre for Policy Research; AN Jha, member of 15th Finance Commission and Madan Sabnavis, chief economist at CARE Ratings.
    Watch video for more.
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