In a recent economic review by India's Union finance ministry, eight states have successfully capped their fiscal deficit at 3% or below their gross state domestic product (GSDP) for the ongoing financial year. These states include Gujarat, Jharkhand, Uttar Pradesh, Telangana, Odisha, Uttarakhand, Bihar, and Goa. This move is seen as a positive sign of rising budget discipline, aligning with the fiscal responsibility framework recommended by the Finance Commission. However, the report highlights Punjab as the most indebted state, with outstanding liabilities reaching 45.1% of its GSDP, followed by Himachal Pradesh at 40.5% and Rajasthan at 36.8%. In contrast, states like Odisha and Gujarat demonstrate stronger fiscal balance sheets with liabilities at 14.1% and 14.7%, respectively.

The review indicates that revenue-surplus states, such as Uttar Pradesh, have managed to adhere to fiscal norms while maintaining positive revenue balances. Conversely, states like Punjab and Himachal Pradesh, which face high committed expenditures, are struggling with persistent revenue deficits. Economists emphasize the need for states to review their liabilities, as maintaining a fiscal deficit is crucial for fiscal consolidation. As the Centre shifts focus towards a debt-to-GDP regime, the fiscal landscape remains uneven, with some states exhibiting stronger fiscal health than others, necessitating a collective effort for sustainable financial management.