Chhattisgarh ranks 2nd in Fiscal Health Rankings, Bengal, Punjab, and Kerala lag behind

Chhattisgarh, one of poorest states in country, is second best in overall fiscal health scorecard after Maharashtra, and ahe of Telangana, while bottom three are Bengal, Punjab and Kerala, shows a report by a foreign brokerage.

Based on FY24 first budget estimates, top three states are Maharashtra, Chhattisgarh and Telangana, and bottom three states are Bengal, Punjab and Kerala, shows a report on fiscal health of key 17 states, penned by Kaushik Das, chief economist at Deutsche Bank India.

Based on FY23 revised budget estimates, Maharashtra tops ranking, followed by Chhattisgarh, Orissa, Telangana and Jharkhand.

In contrast, Bengal fares worst, followed by Punjab, Bihar, Rajasthan and UP, with Kerala moving out of worst five; while Andhra's ranking has dropped to 11th in FY23 from eighth in FY22, and Gujarat has slipped to seventh rank from fifth.

However, based on revised FY22 actual budget data of 17 key states, Chhattisgarh tops list followed by Maharashtra, Orissa, Jharkhand and Gujarat, and in contrast, Punjab fares worst, followed by Bengal, Kerala, Rajasthan and Bihar, report said.

Four fiscal parameters

report on fiscal health of key 17 states is based on four key fiscal parameters--fiscal deficit; own tax revenue, state debt levels, all as a percentage of ir individual gross state domestic product; and finally interest payment to revenue receipts.

Based on se four parameters, Punjab, Bengal, Bihar, Rajasthan and Kerala, are and will remain most vulnerable to debt sustainability risks given ir weak fiscal and debt metrics even prior to pandemic, says report, ding a June 2022 report by Reserve Bank h also warned se states.

A historical ranking of se key states over a longer time horizon shows Maharashtra, Karnataka, Tamil Nu and Chhattisgarh typically in top quartile during fiscals 2004 to 2016.

However, demand for accommodating farm loan waivers, power sector debt restructuring, an unprecedented Covid-19 shock and or state-specific factors have impacted fiscal dynamics of some of se states severely.

For 2004-2016 period, states that featured repeatedly in bottom quartile are Bengal, Bihar, UP, and Rajasthan.

UP has shown improvement, Punjab and Kerala deteriorate

As per latest FY22 final figures, Bengal, Bihar and Rajasthan continue to be in bottom quartile, but Uttar Presh has shown some improvement. Meanwhile, fiscal health of Punjab and Kerala has deteriorated significantly based on FY22 actual fiscal data.

Meanwhile, fiscal deficit of se 17 states is estimated at around 3.3 per cent of Gross State Domestic Product (GSDP) in FY24, down from 3.7 per cent in FY22. With Centre's debt/GDP estimated at 56.1 per cent for FY24, this should result in a general government debt/GDP of 85 per cent.

However, report warns of a risk of states' debt/GSDP ratio being higher than FY24 budget estimate, given that nominal GDP growth is likely to moderate sharply to 9-9.5 per cent in current fiscal from double-digit nominal GDP growth recorded in last two fiscals.