According to fiscal projections by India Ratings & Research, what fiscal deficit level is projected for Indian states in FY27 as a percentage of GDP?

Solution

India Ratings & Research projected that the combined fiscal deficit of Indian states will reach about 3 percent of GDP in FY27, compared with 2.8 percent in FY26. Fiscal deficit represents the gap between total government expenditure and revenue receipts excluding borrowings. The projected increase reflects pressures on state finances due to rising welfare spending, pre-election transfers and cost-sharing obligations for government schemes. The Sixteenth Finance Commission has recommended maintaining a fiscal deficit cap of 3 percent of Gross State Domestic Product (GSDP) for individual states to ensure fiscal discipline and sustainable public finances.