States’ gross fiscal deficit topped 3% in FY25 after three years: RBI report

States’ consolidated gross fiscal deficit increased to 3.3 per cent of gross domestic product (GDP) in 2024-25, after remaining below 3 per cent during the previous three financial years, the Reserve Bank of India (RBI) said in a report titled, ‘State Finances: A Study of Budgets of 2025-26’.

- BS REPORTER

For 2025-26, states have budgeted a gross fiscal deficit at 3.3 per cent of GDP while improving composition of spending by restraining revenue expenditure.

“The deficit exceeding 3 per cent mainly reflects 50-year interest-free loans from the Centre under special assistance to states for capital investment. This is over and above the normal net borrowing ceiling of states. In 2025-26, states have budgeted a gross fiscal deficit of 3.3 per cent of GDP,” the report said.