State budgets: Less 'crowding out'

Collective borrowing by the Centre and states this year will likely be half of the financial savings of households

Given how important state government budgets are in the Indian economic framework, the Reserve Bank of India publishing its compendium of state finances 10 months earlier than it usually did is a welcome development. Not only will this improve market efficiency, it may also help policymakers manage the economy better. After all, the aggregate state government expenditure is now 90 per cent more than the net central government expenditure and states together incur nearly the same deficit as the Centre. Their bond issuances, an afterthought for the markets a decade back, now exceed the Centre's issuance in some quarters.

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