The Goods and Services Tax (GST) scheduled to be rolled out from July will improve state finances, the Reserve Bank of India said on Friday, estimating a higher-than-expected average deficit at 3.4% of GDP during 2016-17. Although states’ fiscal deficit widened to 3.4% as against the budgeted 3%, RBI termed overall fiscal position as “sustainable” in the long run while counting on the GST as a big positive for finances. In 2015-16, the gross state fiscal deficit (GSFD) came at 3.6% after revised estimates against a budgeted estimate of 2.6%. “Despite the increase in the debt burden of the states in recent years, the overall fiscal position is found to be sustainable in the long run,” RBI said in its annual report on state finances. It can be noted that analysts recently raised concerns over the states’ increasing fiscal deficits, even as the Centre limits its number.

Source: Hindustan Times May 12, 2017 15:22 UTC