Fiscal Populism, Cash Transfers by States Risk Crowding Out Growth-Enhancing Spending, Affect India’s Fiscal Credibility: Economic Survey 2025-26

Economic Survey: Health warning for states' fiscal metrics

State government finances are facing challenges with rising deficits and increased borrowing. While capital expenditure is being supported by central government loans, a rise in unconditional cash transfers is impacting fiscal space. This trend could lead to higher sovereign borrowing costs. Prudent fiscal management by states is not being rewarded with lower borrowing rates.

Fiscal populism, cash transfers by states risk crowding out growth-enhancing spending, affect India’s fiscal credibility: Economic Survey 2025-26

The number of revenue surplus states reduced from 19 in FY19 to 11 in FY25. In the last three years, the number of states implementing cash transfer scheme increased more than fivefold.

Eco survey raises concern of States fiscal situation, revenue surplus states decline from 19 in FY19 to 11 in FY25

New Delhi [India]: The number of Indian states reporting a revenue surplus has declined sharply over the years, falling from 19 in FY19 to just 11 in FY25 (Provisional Accounts), highlighting rising fiscal stress at the state level, according to the Economic Survey. The Survey noted that between FY19 and FY25PA, as many as 18 states witnessed a deterioration in their revenue balances. Of these, 10 states slipped into a revenue deficit from a rev…