The central bank’s handbook on Indian provinces said, Rajasthan and Uttar pradesh remains the state with highest fiscal deficits last year. This has been prolonged even as their budget estimates target reductions occurred by 36 percent and 22 percent respectively in the fiscal year 2017. The excess of total expenditure over total revenue can be termed as fiscal deficit. Borrowings are not included while calculating the total revenue.
As per the data released on Saturday 24th,2017. Rajasthan stands inflated with the highest gross fiscal deficit this year. In March,2015 it had a record of 19,000 crore which has gone up more than three times at 67,350 crore, in accordance with the revised estimates in the year ended March 2016. Uttar pradesh has been recorded as the highest absolute deficit with RS.32,510 crore in the year ended March 2015, it has not been left far behind with RS.64,320 crore in March 2016.
However, both the states have set to focus to take the edge off the fiscal deficits in the fiscal ended March 2017. Rajasthan and Uttar Pradesh have targeted to restrain their deficits to RS. 43,150 crores and RS.49,960 crores respectively.
"Initial trends show that states are attempting to lower borrowings, which will bring down their deficit. Even in the current financial year, state borrowing is coming down. It remains to be seen whether it is due to better collection of taxes post-demonetisation. But the recent spate of farm loan waivers could make a big dent in state finances. Not to forget the impact of the Seventh Pay Commission and GST, which could hit state revenue in the short term," a private bank economist said.
CM Devendra Fadnavis, proclaimed Rs 34,000 crore loan waiver scheme on Saturday, Maharashtra became the latest state to have officially declared a loan waiver.The programme would permit to write-off debt up to Rs 1.5 lakh per farmer. The former waivers started after UP proclaimed Rs 36,359-crore plan in April.States like UP , which are debt-laden, will find it burdensome to find the resources to make up for the waivers. Later, it was followed by similar announcements made by Karnataka and Punjab.
Credit by commercial bank have started to slow down from fiscal 2015 as per RBI statistics. Lending from state-owned bank have stood still and bank credit has fallen to 5.1per cent in fiscal year 2017, this has been the slowest in over 60 years. There has been sharp slowdown in the industrial credit, which is already appeared to be sinking.