TRENDS IN STATE FINANCES IN INDIA FROM 1990-91 TO 2020-21

Abstract

The frequent changes in the political parties in power in states have influenced the revenue mobilisation and expenditure policies of the state governments in India. Economic and political factors over a period of time are responsible for leading the state government to a fiscal crisis. Rapid deterioration of state governments finances in India has been a serious issue in recent decades in India. The deterioration of State governments finances is mainly due to increase of committed revenue expenditure and implementation of too many welfare schemes and freebies. As per RBI report 2022-23, the state governments debt to GDP ratio is 29.5 percent in India in 2022-23. But it is more than the FRBM limit of 20 percent. The state governments total expenditure is about one and half times more than the Centre expenditure. After implementation of GST in 2017 in India, GST is the major source of revenue (42 %) for state governments. This paper examines a comprehensive analysis of trends in state finances in India during the last 30 years period. KEYWORDS: State Finances, Fiscal Imbalances, Revenue, Expenditure, Deficits.