India's enigmatic state finances

Until the actual data are available a year later, how does one think about the states' fiscal stance? Is it rising, or falling?

India’s public sector borrowings remain stuck at elevated levels. However, the underlying mix has been changing. The period FY13-17 was characterised by the central government lowering its fiscal deficit and the states offsetting these efforts by running wider deficits. Then, in FY18, after lowering the deficit every year since FY13, the central government paused. Meanwhile, after rising almost every year since FY13, the state fiscal deficit fell notably in FY18, according to our analysis. What’s driving this? And are we at an inflection point for state finances?

First, we need to address the data limitations we face with state finances. The