RBI warns states & the center that rising subsidy expenditure could reduce money left over for productive uses -Story by TCA Sharad Raghavan
New Delhi: The Reserve Bank of India (RBI) has voiced concern about the rising levels of subsidies that state governments are promising, saying this was an “area of incipient stress” that could crowd out other more productive expenditure. Another area of concern the central bank pointed out was a persistent high level of debt among the states. The RBI Thursday released its ‘State Finances: A Study of Budgets’ report for the financial year 2024-25, in which it analysed budgets presented for the year by all states and UTs with legislatures. The report also contains recommendations for the way forward. “First, an area of incipient stress is the sharp rise in expenditure on subsidies, driven by farm loan waivers, free/subsidised services (like electricity to agriculture and households, transport, gas cylinder) and cash transfers to farmers, youth and women,” the RBI noted. “States need to contain and rationalise their subsidy outgoes, so that such spending does not crow...