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According to RBI Report State's Freebies Strain Resources Needed for Development.

Banking & Finance | Dated: 26 Dec 2024

In December 2024, the Reserve Bank of India (RBI) released a report titled "State Finances: A Study of Budgets of 2024-25". The report cautioned that state governments' freebies, such as farm loan waivers, free electricity, and transport, could potentially crowd out resources needed for social and economic infrastructure development.

🎯 Key Highlights:

  • - The theme of the report is "Fiscal Reforms by States". It provides a comprehensive assessment of state finances for the Financial Year 2024-25 (FY25) against the backdrop of actual and revised/provisional accounts for FY23 and FY24, respectively.

💡 Other Important Facts:

  • (i) The report appreciated state governments for their progress in fiscal consolidation, keeping the total Gross Fiscal Deficit (GFD) within 3% of Gross Domestic Product (GDP) for three consecutive years (2021-22 to 2023-24), and limiting the revenue deficit to 0.2% of GDP in FY23 and FY24.
  • (ii) According to the report, states have estimated a GFD of 3.2% of GDP in FY25, compared to 2.8% of GDP in FY24.

📚 Test Your Knowledge:

Which institution cautioned about state governments’ freebies crowding out resources needed for infrastructure development in December 2024?

Correct Answer: RBI

🚀 Quick Recap:

About RBI

  • CEO : Shri Shaktikanta Das
  • Headquarters : Mumbai