RBI Report: States’ Gross Fiscal Deficit below Budget Estimate for 2nd Consecutive Year

Current Context: According to the Reserve Bank of India’s (RBI) report titled, ‘State Finances: A Study of Budgets of 2023-24’, states have sustained improvement in their finances during 2022-23, with a combined gross fiscal deficit (GFD) at 2.8% of the gross domestic product (GDP).

• This is below the Budget Estimates for the second consecutive year.
• The deficit reduction was achieved primarily through a reduction in the revenue deficit while sustaining robust capital outlays.
• The implementation of goods and services tax (GST) has led to increased tax buoyancy for the states.
• States’ total outstanding liabilities are budgeted to fall to 27.6% of GDP for 2023-24 from the peak of 31% in 2020-211.
• However, outstanding liabilities may remain higher than 30% of gross state domestic product (GSDP) for many states.

Question:

Q.1 What was the combined gross fiscal deficit (GFD) of the states for the year 2022-23?
a. 2.8% of GDP
b. 3.1% of GDP
c. 3.5% of GDP
d. 4.0% of GDP