New Delhi: S&P global rating It said on Friday that despite a possible rebound in the economy in the next 12-24 months, the COVID pandemic could worsen the structural deficit and indebtedness of the states.
The US-based rating agency expects the country’s economic growth to remain above average in the next few years and the rebound in the economy in the current fiscal ending March 31, 2022, will be included in the revenues of the states.
S&P estimates that states’ revenues will grow at an average annual average of 17 per cent in FY 2021-2023.
“The COVID-19 The pandemic could further worsen the structural deficit and indebtedness of Indian state governments. In a report titled ‘Public Finance System Overview: Indian States’, S&P said, “India’s strong growth relative to allies has been a significant factor undermining the stability of states’ fiscal performance.”
S&P Global Ratings had cut India’s growth forecast for the current fiscal to 9.5 per cent from 11 per cent.
The agency downgraded the growth outlook, saying a severe second Covid-19 outbreak in April and May led to a sharp contraction in economic activity, but a gradual revival is underway.
S&P said it would be difficult for state governments to sharply reduce the high expenditure induced by Covid-19. The pandemic has increased spending on healthcare, social security and digital infrastructure.
The agency believes that exceptional support from the Central Government and Reserve Bank of India It will remain a major pillar for the financial structure and performance of the states.
“A significant risk to the financial framework and performance of Indian states will be the ₹3 trillion power sector reforms announced in the budget for FY 2021-22 presented by the central government. Though the details of the proposed reform are not yet known, meaningful participation of the state will be required. It is likely that the debt of the discoms has been transferred to the states due to the significant linkage between the power distribution companies (discoms) and the states,” the S&P said.
The US-based rating agency expects the country’s economic growth to remain above average in the next few years and the rebound in the economy in the current fiscal ending March 31, 2022, will be included in the revenues of the states.
S&P estimates that states’ revenues will grow at an average annual average of 17 per cent in FY 2021-2023.
“The COVID-19 The pandemic could further worsen the structural deficit and indebtedness of Indian state governments. In a report titled ‘Public Finance System Overview: Indian States’, S&P said, “India’s strong growth relative to allies has been a significant factor undermining the stability of states’ fiscal performance.”
S&P Global Ratings had cut India’s growth forecast for the current fiscal to 9.5 per cent from 11 per cent.
The agency downgraded the growth outlook, saying a severe second Covid-19 outbreak in April and May led to a sharp contraction in economic activity, but a gradual revival is underway.
S&P said it would be difficult for state governments to sharply reduce the high expenditure induced by Covid-19. The pandemic has increased spending on healthcare, social security and digital infrastructure.
The agency believes that exceptional support from the Central Government and Reserve Bank of India It will remain a major pillar for the financial structure and performance of the states.
“A significant risk to the financial framework and performance of Indian states will be the ₹3 trillion power sector reforms announced in the budget for FY 2021-22 presented by the central government. Though the details of the proposed reform are not yet known, meaningful participation of the state will be required. It is likely that the debt of the discoms has been transferred to the states due to the significant linkage between the power distribution companies (discoms) and the states,” the S&P said.
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