State finances are showing signs of increasing fiscal imbalance

Fiscal deficit aggregates fell from 1.93% in 2011-12 to 3.03% in 2015-16

Finances of state governments are showing signs of increasing fiscal imbalance, though the Centre’s books have shown a degree of consolidation.

A paper by the National Institute of Public Finance and Policy (NIPFP) said if trends of all state finances were considered, it appeared that their fiscal deficit has started increasing in the recent years.

Fiscal deficit aggregated across the states deteriorated as a percentage of GDP from 1.93 per cent in 2011-12 to 3.03 per cent in 2015-16. It was budgeted to further decline to 3.67 per cent in 2016-17. As such, the deficit breached the ceiling of 3