Key facts
- India's strong economic growth is helping to stabilize state finances despite ongoing fiscal deficits and rising debt levels.
- S&P Global Ratings noted that states face significant spending pressures and revenue-expenditure mismatches.
- Robust economic expansion is supporting revenue growth and keeping credit risks manageable for Indian states.
- States are responsible for approximately two-thirds of total public expenditure in India.
- S&P forecasts India's real GDP growth to average 6.9% between fiscal years 2027 and 2029.
- The agency anticipates that most states' debt levels will stabilize in the coming years due to improved revenue growth.
India's state finances are being bolstered by strong economic growth, which is helping to mitigate the impact of persistent fiscal deficits and rising debt levels, according to S&P Global Ratings. The agency's report indicates that while states continue to face significant spending pressures and revenue-expenditure mismatches, the robust economic expansion is sustaining fiscal revenue growth and keeping credit risks manageable.
States play a crucial role in India's economic development, responsible for about two-thirds of total public expenditure, with substantial infrastructure needs. S&P anticipates that these spending requirements will continue to weigh on budgetary settings. However, the agency forecasts India's real GDP growth to average 6.9% between fiscal years 2027 and 2029, among the highest globally.
Looking ahead, S&P expects the debt levels for most states to stabilize over the next few years, driven by improvements in operating revenue growth. The report also highlighted that reliable access to funding and liquidity for states is supported by the Reserve Bank of India and deep domestic capital markets.