States unlikely to achieve 20% debt-to-GDP ratio target by FY23: Report

Though the Centre may manage to achieve the debt-to-GDP ratio target of 40 per cent by FY23, the states achieving the 20 per cent target looks difficult as most of them have not budgeted so far, warned a report.

The states' aggregate debt-to-GDP ratio for FY19 has been budgeted at 24.3 per cent and according to their FY19 budgets, only 10 of the 20 states will have debt-to-GSDP ratio of under 25 per cent in FY19, noted the report by India Ratings' chief economist, DK Pant.

The NK Singh committee, which is reviewing the Fiscal Responsibility and Budget Management Act of 2003, has suggested that the fiscal policy try to reduce the debt-to-GDP ratio to 60 per cent by FY23, with the Centre's at 40 per cent and the states' combined at 20 per cent, instead of improving the revenue to fiscal deficit ratio.

Eight states namely Himachal, Jammu & Kashmir, Kerala, Manipur, Meghalaya, Nagaland, Punjab and Rajasthan had debt-to-GSDP ratios in excess of 30 per cent in FY18, suggesting that the aggregate debt-to-GDP ratio needs to be corrected by 8.92 percentage points between FY18 and FY23, Pant noted.