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WORSENING STATE FINANCES (Issue (As per RBI --> Total deficit of state…
WORSENING STATE FINANCES
Issue
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Many state government has adopted state level fiscal laws and adhered to 3% fiscal target under state level FRBM(Fiscal responsibility and budget management) act
As per RBI --> Total deficit of state reach 3.6% of GDP in 2016 --> Higher than 2.6% for previous year
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Primary(total deficit excluding interest payment) deficit of centre is 0.7% while that of state is 2%
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Solution
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In case of fiscal norm breach --> centre secures parliament approval, state should also secure state legislature approval
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Conclusion
State should not undermine fiscal prudence exercised by centre goverment and should not deteriorate macro statbility