While India is expected to experience Amrit Kaal over the next 25 years, the fiscal health of Indian States remains fragile. RBI has itself named five states as highly stressed while another five remain above the comfort mark. States’ tendency towards handing out cash subsidies and freebies like provision of free utility services and revival of the old pension scheme have put states in this peculiar position. The pandemic only aggravated the fiscal positions.
How do States handle such a critical challenge to their fiscal situation amidst rising aspirations of their population? Can Finance Commission alone come to the rescue? What are new sources of tax and non-tax revenues even while GST has subsumed major taxes in not so distant past?