FM Sitharaman urges states to cut debt, boost fiscal transparency

Finance Minister Nirmala Sitharaman on Wednesday (December 17) emphasised the need for state governments to set clear goals in fiscal management and improve transparency, as part of a broader push to make India a developed nation by 2047.

Speaking at the Times Network India Economic Conclave, Sitharaman said that while the central government has already reduced its debt-to-GDP ratio post-COVID, states must now take responsibility to do the same.

‘Debt-to-GDP ratio on declining path’

"The central government has set clear goals for transparency in budget-making, ensuring that fiscal management is visible to all and meets the highest standards of accountability. As a result, we have been able to bring down the debt-to-GDP ratio since the post-COVID period, when it had crossed 60 per cent. It is now on a declining path," she said.

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According to data, India’s debt-to-GDP ratio peaked at 61.4% post-COVID but was brought down to 57.1% in 2023–24 through fiscal discipline and strategic policies. The Centre expects it to fall further to 56.1% this year.

‘Debt level will be core focus next financial year’

From the next financial year, debt levels and the fiscal deficit will be core focus areas for the government. Sitharaman stressed that state governments must adopt the same level of accountability and fiscal discipline.

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"Unless the debt-to-GSDP is managed better and kept within the FRBM limits and the stock of debt which is being accumulating over the years with high rate of interest which many states are unable to service, unless even those are brought down, you will be borrowing to service the loans, you will not be borrowing for developmental expenditure. That's a poor play in the fiscal terrain," Sitharaman said.

(With inputs from agencies)