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Home / Economy / State’s fiscal balances remain weak in Q1, says Icra

MUMBAI :  The combined revenue balance of 19 states deteriorated in the June quarter to a deficit of 50,000 crore, compared to a surplus of 10,000 crore in the year-ago quarter, primarily due to the varied recovery in revenues and expenditures of state governments, rating agency Icra said on Thursday.

Aditi Nayar, chief economist, Icra Ltd, said fiscal data reported by the Comptroller and Auditor General for the states reveals that their combined revenue receipts in Q1 FY22 were only 2% higher than the pre-covid level of 4.3 trillion. The recovery in receipts was led by non-tax revenues, even as own taxes and central tax devolution trailed the level witnessed in Q1FY20, she said.

“Simultaneously, the revenue spending of the 19 state governments increased by a sharper 14% to 4.9 trillion in Q1FY22 from the pre-covid level of 4.3 trillion, possibly reflecting higher social sector spending amid the second wave of covid-19. Given the permission to continue construction activities with some restrictions, capital spending by the 19 state governments recovered to 0.6 trillion in Q1FY22, exceeding the pre-pandemic level of Q1FY20 by a heartening, albeit mild 2.6%," added Nayar.

The combined revenue balance of the 19 states slipped into a deficit of 0.5 trillion in Q1FY22, in contrast to the small surplus of 0.1 trillion in Q1FY20. Moreover, their fiscal deficit has nearly doubled to 1.1 trillion in Q1FY22 from the pre-covid level of 0.6 trillion in Q1FY20, she said.

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