States overall deficit set to decline in FY20: Economists

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  1. State Bank of India(SBI) Economists has said that states have managed to contain the fiscal deficit at the aggregate level for FY20.All the states have projected a decline in fiscal deficit next year,except Odisha,Assam and Uttarakhand.Despite the increase,these three states are keeping the fiscal deficit below 3%.
  2. The factors that helped in reducing fiscal deficit were (a)Decrease in capital expenditure (b)healthy growth in the Gross State domestic product (c)increase in GST collections being budgeted for by the states and (d)reduction in revenue expenditure.
  3. However,Economists have expressed concerns over reduction in capital expenditure.The reduction in capital expenditure is because of heavy burdens undertaken during the middle of the year like loan waivers.
  4. Fiscal deficit is the difference between total revenue and total expenditure of the government.It is an indication of the total borrowings needed by the government.Gross state domestic product (GSDP) is the monetary value of all the finished goods and services produced within a state in a specific time period.
  5. Revenue expenditure is expenditure which doesn’t create any asset and neither does it cause any reduction in any liability of the government. It is recurring in nature and is incurred on normal functioning of the government and the provisions for various services.For example the salaries,pensions, interests,defence services,health services, grants to state are all revenue expenditures.
  6. Capital Expenditure is that expenditure which results in increasing of government asset (giving out loans) or reduces in some liability (paying back old loans).For example loans given by the Government to the states, PSUs and other governments,loans that were borrowed in the past but are now returned back,expenditure resulting in asset creation.