The Centre is helping to compensate for the states' excesses, but it may not last long
India’s state finances have done an about-face. From 2009-13, state fiscal deficits contracted sharply but they have ballooned since. As a result, the spreads on state bonds (SDLs)—in effect the interest premium the states have to pay for borrowing—have skyrocketed. Today, India’s states account for 60% of overall government spending, thus more than the Centre. This means it is going to be increasingly important to understand the states, and state discipline is essential if the official recommendation that India’s public debt be lowered to 60% of GDP by 2023 (from 66% now) is to be met.