Bengal to Rajasthan: It's crunch time for states' finances as economy slows

Outstanding debt of states has risen over the last five years to 25% of GDP, posing medium-term challenges to its sustainability.

India’s sharp slowdown is endangering the fiscal deficit targets of its states, threatening to unravel progress made over the past few years and driving borrowing costs higher for some of them.

The states have budgeted a consolidated fiscal deficit target of 2.6% of gross domestic product in the financial year ending March, a recent study by the Reserve Bank of India shows. While the deficit ratio has remained within the mandated threshold of 3% of GDP in the previous two years, doubts are growing about their ability to meet the latest goal.

Any slippage could see India’s overall public finances come under