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State Finances improve and Gross Fiscal Deficit Declines by 31.5%

Published on May 31, 2022
Current Context: According to the recent report of RBI State finances showed improvement in 2021-22 as the consolidated gross fiscal deficit (GFD) of 26 states was lower by 31.5% compared to the previous year.
State Finances improve and Gross Fiscal Deficit Declines by 31.5%
  • As per the information available, the gross fiscal deficit declined mainly due to higher growth in revenue receipts this year by 30.5% compared to 8.6% in 2020-21.
  • Many steps like the center’s move to reduce excise duty on petrol and diesel, a majority of the states cutting their value-added tax (VAT) on petrol and diesel, etc. play a very important role in narrowing the gross fiscal deficit.
  • Apart from that State government finances were budgeted to improve in 2021-22 with the GFD-GDP ratio narrowing to 3.5% from 4.7%.
  • In addition to that central government has also come up with a scheme for Financial Assistance to States for Capital Investment in which the outlay has been increased to Rs 15,000 crore for 2021-22.
  • The Centre has allowed the states a fiscal deficit of up to 4% of gross state domestic product in 2022-23.


Q.1 Gross Fiscal Deficit of state has been declined by what percentage as per RBI annual report?
a. 31.5%
b. 20%
c. 35%
d. 30.5%
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