Emerging Trends in State Finances in India: 1995-96 to 2011-12

Sharp deterioration in state finance during the last decade has been a matter of serious concern to policy makers in India. The deterioration in State finance is largely an outcome of the fact that in the fact of a limited resource-base the states had to cope with a significant growth in their committed expenditure. Correcting the fiscal imbalances today is the single most important object of the new economic policy in India. The crucial issue therefore is to bring out improvement in State finance with a view to restructuring the expenditure in favour of development expenditure in order to enable a higher growth. The states took policy measures which helped them to avoid further worsening of their fiscal position to some extent. The Thirteenth Finance Commission has set a target of reducing fiscal deficit to 3% of GDP for States latest by 2014-15. The present study attempts to bring out the emerging trends in state finances of India in recent years.