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    Question

    Which of the following statements is/are NOT TRUE with

    respect to the data been released in Reserve Bank of India’s report State Finances: A Study of Budgets of 2023-24? I.States’ total outstanding liabilities are budgeted to fall to 22.6 per cent of GDP for 2023-24 from the peak of 31 per cent in 2020-21. II.Gross market borrowings increased in 2022-23, reaching Rs 5.58 trillion, with some states reducing borrowings in the past two years. III.Committed expenditure, which includes interest payments, administrative services, and pension, is expected to remain at 4.5 per cent of GDP.
    A Only I Correct Answer Incorrect Answer
    B Only I & II Correct Answer Incorrect Answer
    C Only III Correct Answer Incorrect Answer
    D Only I & III Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    According to the Reserve Bank of India’s report titled State Finances: A Study of Budgets of 2023-24, states have sustained improvement in their finances — which was achieved in the financial year 2021-22 — even during 2022-23 with a combined gross fiscal deficit (GFD) at 2.8 per cent of the gross domestic product (GDP). States’ total outstanding liabilities are budgeted to fall to 27.6 per cent of GDP for 2023-24 from the peak of 31 per cent in 2020-21. However, outstanding liabilities may remain higher than 30 per cent of gross state domestic product (GSDP) for many states. In terms of expenditure dynamics, revenue expenditure growth slowed to 8.9 per cent, creating room for higher capital outlay, which surged by 52.6 per cent during the first half of the current financial year. States’ dependence on net market borrowings, which had risen significantly in the past, declined to 76 per cent in the budgeted GFD for 2023-24. Gross market borrowings increased in 2022-23, reaching Rs 7.58 trillion, with some states reducing borrowings in the past two years. Net market borrowings increased by 5.4 per cent in 2022-23, and were concentrated in specific states. In the year 2023-24, states have budgeted revenue expenditure at 14.4 per cent of GDP, with social sector expenditure at 8 per cent of GDP. Committed expenditure, which includes interest payments, administrative services, and pension, is expected to remain at 4.5 per cent of GDP.

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