Covid-19 to worsen indebtedness of states despite economic rebound: S&P – Times of India

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NEW DELHI: S&P Global Ratings on Friday stated the Covid pandemic might worsen structural deficits and indebtedness of states, despite a probable rebound within the economic system over the following 12-24 months.
The US-based mostly ranking company expects the nation’s economic development to stay above common over the following few years and the rebound within the economic system within the present fiscal ending March 31, 2022, will feed into states’ revenues.
S&P estimates revenues of states to enhance by a mean of 17 per cent yearly over fiscals 2021-2023.
“The Covid-19 pandemic could worsen structural deficits and indebtedness of Indian state governments. India’s stronger growth than peer countries has been a key factor underpinning the sustainability of states’ fiscal performance,” S&P stated in a report titled ‘Public Finance System Overview: Indian States’.
S&P Global Ratings had reduce India’s development forecast for the present fiscal to 9.5 per cent from 11 per cent earlier.
The company lowered the expansion outlook saying {that a} extreme second Covid-19 outbreak in April and May led sharp contraction in economic exercise, however a gradual revival is underway.
S&P stated it will likely be exhausting for state governments to quickly scale down elevated expenditures induced by Covid-19. The pandemic has led to elevated spending on healthcare, social security and digital infrastructure.
The company believes the extraordinary help from the central authorities and the Reserve Bank of India will stay a key pillar for states’ fiscal framework and efficiency.
“A significant risk for the fiscal framework and performance of Indian states will be the Rs 3 trillion power sector reforms announced in FY2021-22 budget presented by the central government. While details of the proposed reform are not known yet, meaningful state participation is likely. The significant linkages between the power distribution companies (discoms) and states have led to the indebtedness of the discoms shifting to states,” S&P added.



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