Revenue-deficit States may face fiscal stress, says Centre
The Union Finance Ministry has warned that States with revenue deficits and high debt burdens will find it harder to deal with fiscal shocks, including from the West Asia crisis, forcing them to either reprioritise expenditure away from productive areas, or approach the Centre for more funds at a time when it is trying to consolidate its own finances.In its Monthly Economic Review for April, the Department of Economic Affairs in the Ministry said nine of the 18 large States analysed were in revenue deficit as per their own projections for 2026-27. Seven are projected to be revenue surplus, while one is in revenue balance.
A revenue deficit is when expenditure on recurring items such as salaries, pensions, subsidies, and interest payments exceeds the revenue earned from sources such as taxes and fees.
The States with projected revenue deficits as a percentage of their gross state domestic products (GSDP) are Himachal Pradesh (-2.4%), Punjab (-2.2%), Kerala (-2.1%), Andhra Pradesh (-1.1%), Rajasthan (-1.1%), Haryana (-0.9%), Karnataka (-0.7%), Maharashtra (-0.7%), and Chhattisgarh (-0.3%).
Tamil Nadu and West Bengal were excluded from the analysis as they have so far presented only interim budgets for 2026-27.
“Revenue-deficit States are constrained by the debt servicing obligations and carry, on average, significantly higher outstanding liabilities than revenue-surplus States, and many of them spend more than 15% of their revenue receipts on interest payments,” the report of the Ministry noted.
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