States improve fiscal position, but local bodies still suffer: RBI report

Covid worsened finances of local govts in 2020-21 and 2021-22; local authorities would lose 15-25% of their revenues in 2021, which may make maintenance of current level of service delivery difficult

States have budgeted to bring down their deficits by a full percentage point from last year, as revenue improved in sync with lift in pandemic-related restrictions, but the local bodies have been badly hit by the pandemic and must be allowed functional autonomy, said a report by the Reserve Bank of India (RBI) on Tuesday.

For 2021-22, the states have budgeted their consolidated gross fiscal deficit (GFD) to gross domestic product (GDP) ratio at 3.7 per cent, “a marked improvement from the level of 4.7 per cent in the revised estimates for 2020-21, the year of the first wave of