Our studies on State finances in Reserve Bank of India give grounds for optimism in regard to their fiscal health. From 2003-04, there has been a sharp correction both in the revenue and fiscal deficits; and the process of correction is primarily due to buoyancy in revenue receipts, States’ own tax revenue as well as transfer and devolution of resources from Centre.
It is noteworthy that for all the States together, the revenue deficit relative to the GDP is estimated to decline to 0.4 per cent in the current year from one per cent in the previous year and 2.7 per cent in 1990-2000.