Poll-bound states spent carefully while cutting debt

Poll-bound States reduced their outstanding liabilities arsenic a stock of GSDP portion keeping improvement expenditure intact signalling fiscal prudence without compromising connected welfare

According to information successful the RBI State of State Finances report, Assam, Kerala, Tamil Nadu West Bengal and Puducherry, which are gearing up for elections successful 2026, consistently reduced their indebtedness by up to 4 percent points since 2021, erstwhile the respective governmental parties came to power.

Among the 5 States, however, West Bengal has the highest stock of indebtedness successful GSDP astatine 39% arsenic per Fiscal 2025-26 Budget Estimates, according to Reserve Bank of India (RBI) Study of State Budgets 2025. This was, however, down by 4.7 percent points from 2021.

Kerala chopped its outstanding liabilities by 4.8 per centage points to an estimated 35.5% of its Gross State Domestic Product (GSDP). Tamil Nadu’s indebtedness stood astatine 29.2% of the GSDP. Assam had a 28% of GSDP successful indebtedness and Puducherry, a Union Territory, astatine 26% of GSDP successful 2025-26.

The politicial parties successful the respective States had travel to powerfulness successful the mediate of the COVID lockdown, erstwhile economical enactment was tepid and the governments prioritised mitigation measures implicit business-as-usual improvement activities. While the States reduced the stock of indebtedness successful examination with the size of their economies, the ratio continued to enactment supra the FRBM Act prescribed bounds of 20%. To beryllium sure, the metric to measurement borrowing of States has been consistently supra the FRBM people since 2016. RBI successful its State fund survey study said this was besides accordant with the summation successful planetary authorities indebtedness burden.

Recent debates betwixt governmental leaders successful Tamil Nadu astir the State’s indebtedness concern drew attraction to the topic. While the critics utilized the nominal indebtedness numbers to signify fiscal stress, the representatives of the ruling parties regularly rebutted saying this was not a occupation arsenic they were spent connected payment and development.

To beryllium sure, spending connected development, societal assemblage and superior outlay successful the 5 states either declined marginally oregon stayed consistently beneath the wide number.

For instance, West Bengal, the astir indebted successful the lot, spent 10.3% of its GSDP connected improvement expenditure successful 2023-24. In 2025-26, it budgeted this constituent astatine a higher 12% of its GSDP. Similarly, Kerala and Tamil Nadu person consistently maintained superior outlay arsenic a stock of GSDP astatine astir 1% and 1.9% successful the past 3 fiscals. Assam has spent not much than 11% of GSDP connected societal assemblage spending successful the past 3 years.

Development/non-development expenditure

“All expenditures relating to gross account, superior outlay and loans and advances are categorised into societal services, economical services, and wide services. While societal and economical services represent improvement expenditure, expenditure connected wide services is treated arsenic non-development expenditure,” RBI said successful its methodology note.

RBI besides said that portion astatine the aboveground States are not successful a crisis, antithetic States are successful varied demographic stages and that volition person a disproportionate effect connected fiscal pressure. Kerala and Tamil Nadu person a 5th of the colonisation supra the property of 60. “Youthful States whitethorn harness their demographic dividend by strengthening quality superior investments, intermediate States whitethorn equilibrium maturation priorities with aboriginal mentation for aging, and ageing States whitethorn heighten gross capableness alongside healthcare, pension and workforce argumentation reforms,” said RBI successful its study.