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Most of these states have surpassed their debt levels as prescribed by the 15th Finance Commission.Īlso read: Why Punjab, Bihar, Rajasthan, Andhra, UP must learn from Sri Lanka, cut debt and freebiesĭuring the presentation, Somanathan said that states must take a leaf out of the Centre’s book and implement some of the recent decisions taken by them last month. The highly stressed states, according to the study, are Bihar, Kerala, Punjab, Rajasthan, West Bengal, Andhra Pradesh, Jharkhand, Madhya Pradesh, Haryana and Uttar Pradesh. These suggestions come on the back of the Reserve Bank of India (RBI) releasing a detailed study last month in which they highlighted at least 10 states that have witnessed a slowdown in their own tax revenue, a high share of committed expenditure and rising subsidy burdens, stretching their finances already exacerbated by Covid-19. In 2021, the 15th Finance Commission, too, had stressed the importance of periodic increase in property tax rates by municipalities in line with inflation and growth. The recommendations were part of a presentation, which ThePrint has seen. Some of the possible measures suggested by Somanathan to reduce states’ revenue deficit included periodic increase in property taxes, regularly raising fees for various government services like water, and periodically raising excise duty on liquor, among other things. These included “rationalisation of schemes and autonomous bodies and measures to reduce inefficient subsidies”. Somanathan, at a meeting with chief secretaries of states in Dharamshala between 15 and 17 June, which was also attended by Prime Minister Narendra Modi, made a slew of suggestions to help states improve their finances. But it has now pushed the Union government to raise the alarm and suggest material changes in the states’ spending to prevent a situation of default. New Delhi : That the fiscal health of many Indian states is not robust - and their debt burden is holding them from spending on capital assets - is a known thing.