The debt burden of the states will increase, the deficit will worsen

Mumbai: The Corona epidemic will increase the debt burden of India's state governments and could exacerbate the deficit. Despite expectations of improvement in the Indian economy over the next one to two years, the rating agency Standard & Poor's (S&P) has come up with these expectations. It will be difficult for state governments to quickly recover from the high costs caused by Corona. The Corona epidemic has forced state governments to increase spending on healthcare, social security and digital infrastructure, according to a statement from S&P.

The epidemic has delayed the consolidation targets of states under the Fiscal Responsibility and Budget Management Act (FRBM). The widening gap between revenue-raising capacity and spending responsibilities has made it difficult for state governments to maintain FRBM targets even in Corona's previous position.

Now their deficit will increase significantly and the pace of consolidation will be slow and painful, the statement said.

On the positive side, the rating agency said strong support from the central government and the Reserve Bank would be a key pillar of the states' financial viability. The Reserve Bank has helped the states meet their financial needs.

While the central government is presenting the budget for the financial year 2021-2, the Rs. The possibility of meaningful participation of the states in this program is being looked into.

State power distribution companies (DISCOMs) and inter-state alliances have increased the debt burden of the states.