‘Debt-To-GDP Ratio Of States Much Higher Than FY23 Target'
Millennium Post Delhi|December 02, 2021
RBI’s report says as the impact of 2nd Covid wave wanes, state govts need to take credible steps to address debt sustainability concerns

MUMBAI: The combined debt-to-GDP ratio of states is expected to remain at 31 per cent by end-March 2022 which is worryingly higher than the target of 20 per cent to be achieved by 2022-23, according to a RBI report.

The Reserve Bank’s annual publication titled ‘State Finances: A Study of Budgets of 2021-22’ further said as the impact of the second COVID19 wave wanes, state governments need to take credible steps to address debt sustainability concerns.

“The combined debt to GDP ratio of States which stood at 31 per cent at end-March 2021 and is expected to remain at that level by end March 2022, is worryingly higher than the target of 20 per cent to be achieved by 2022-23, as per the recommendations of the FRBM Review Committee,” it said.

In view of the pandemic induced slowdown, in its projections, the 15th Finance Commission expects the debt-GDP ratio to peak at 33.3 percent in 2022-23 (in view of the higher deficits in 202021, 2021-22 and 2022-23), and gradually decline thereafter to reach 32.5 per cent by 2025-26.

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