Fiscal deficit trends in India have shown a big reversal and the situation is expected to get worse in the future. Comparing it with the earlier trends, states seemed fiscally prudent until about three years ago from now than the Centre. They are now having larger fiscal deficits and facing financial difficulties.
Reasons for higher fiscal deficits –
Three key issues raises our fiscal concerns –
UDAY Scheme is significant because it is the need of the hour to bring the debt burden of public sector electricity companies into the books as well as shelving them off to secure a prudent financial future. This fiscal imprudence over fiscal matters through loan waivers would cost the states and the country much more in formulating the monetary policy, growth and expenditure management strategies. Similarly, the losses from liquor ban are being recovered by imposing additional taxes over and above GST like in Maharashtra and Tamil Nadu, but they defeat the very purpose of GST. It is high time for the States to realise that they need to be efficient with their spending patterns, otherwise the liabilities they are adding today would become untenable tomorrow.
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