Election Freebies, Weak Revenues Keep States’ Deficits Elevated Despite Centre’s Consolidation Push: Report

India’s path to fiscal consolidation is increasingly being undermined by states’ rising deficits, even as the Union government continues on its commitment to lower debt levels, according to a new report by Emkay Global Financial Services. The analysis suggests that while the Union government has steadily reduced its fiscal deficit-to-GDP (FD/GDP) ratio post-COVID-19, state governments have shifted in the opposite direction, with aggregate deficits widening since FY22-23 and structurally poised to remain above 3% of gross domestic product (GDP). This divergence, Emkay notes, has profound implications for India’s debt profile. The Union government, which began with a significantly higher debt per GDP ratio than the states, is better positioned to bring down its debt burden even while m