Fiscal Reform by States

The fifteenth Finance Commission (FC-XV) has assessed the fiscal challenges facing States through a survey of State-level macroeconomic, socioeconomic and fiscal indicators as well as the status of health infrastructure, power sector and local bodies’ finances. On this basis, specific reform signposts have been provided as guidance to enable States to chart a sustainable development path through fiscal policy actions

States high dependence on Union transfers, rising incidence of contingent liabilities due to PSUs, unsustainable debt and deteriorating trends in fiscal ratios warrant improvement in key fiscal ratios [viz, debt-GSDP, own tax revenue-GSDP, non-tax revenue-GSDP and revenue deficit-fiscal deficit (RD-FD)]:

⚫ States need to ensure a sustainable stream of revenue from alternative sources such as electricity and mining:

⚫ States with distorted expenditure patterns like low social sector spending, low capital expenditure and high committed expenditure relative to comparable cohorts should undertake corrections through rationalisation/rebalancing of expenditure:. high dependency ratios due to rising old age population, sustained and widening gender disparity, and emerging issues like air pollution and water stress need to be addressed;

⚫ sectors that require special attention like tourism, power projects, urban infrastructure and skilling of youth have been identified

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