New Delhi [India], March 2 : Gujarat and Odisha have emerged relatively better placed in terms of fiscal performance, with manageable levels of debt and deficits, while Punjab continues to face pressure due to elevated debt and interest burden, according to a report by CareEdge Ratings.
The report noted that Odisha and Gujarat's fiscal landscape fares well, supported by manageable debt and deficit levels along with low interest payments-to-revenue receipts.
Both states also have a high share of capital outlay in their total expenditure, indicating a stronger focus on asset creation and long-term development.
It stated "Odisha and Gujarat's fiscal landscape fares well with manageable levels of debt and deficits..... Punjab's fiscal performance is constrained by elevated levels of debt".
In contrast, Punjab's fiscal performance remains constrained by elevated levels of debt, deficits and interest payments-to-revenue.
The state also has a high share of non-developmental revenue expenditure in its total expenditure. This has likely constrained its outlay towards capital expenditure, thereby limiting its ability to allocate more resources for infrastructure and development projects.
The report further highlighted that debt and deficit levels remain elevated in Bihar. However, the state has low interest payments-to-revenue receipts. This is largely because Bihar has a relatively high share in the Centre's tax devolution, which has supported its revenue receipts. As a result, despite elevated debt and deficits, its interest payments-to-revenue receipts ratio remains lower.
States such as Telangana, Andhra Pradesh and Kerala have shown some fiscal slippage in the current fiscal year so far. Telangana and Andhra Pradesh have already exhausted their full-year budgeted fiscal deficit amount in the first nine months of FY26. Kerala has also exhausted close to 84 per cent of its full-year budgeted fiscal deficit target so far.
The report also mentioned that in FY25, freebies were announced in states such as Maharashtra, Odisha and Jharkhand. It said this is expected to exert some pressure despite their relatively encouraging fiscal position.
At the aggregate level, state government borrowing remains elevated this year at Rs 12.5 trillion, which is 16.6 per cent higher than Rs 10.7 trillion in FY25. Higher redemptions till FY31 are expected to keep state borrowings elevated.
Overall, while states such as Gujarat and Odisha remain relatively well-positioned, fiscal pressures persist in states with higher debt and deficit levels, keeping overall state borrowing elevated.
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