According to a Crisil analysis of 17 states released on Tuesday, Bihar recorded the widest fiscal deficit at 5.8% of GSDP in 2025-26, significantly outpacing other major states. The study, titled 'Seeing like a state', based on Comptroller and Auditor General (CAG) data, revealed that Jharkhand posted the narrowest fiscal deficit at 1.2% of GSDP, creating a stark contrast in fiscal management across Indian states.
The analysis showed that combined fiscal deficit across the 17 states remained elevated at 3.2% of GSDP, with 10 states running deficits above 3%, unchanged from the previous year. However, there were signs of improved fiscal discipline, as 13 states met or bettered their fiscal deficit targets last fiscal, up from eight in fiscal 2025. Deficits remained particularly high in Madhya Pradesh, Tamil Nadu, Uttar Pradesh, Telangana, and Bihar, according to the study.
The study highlighted that aggregate state debt rose to 29.2% of GSDP from 28.1% in fiscal 2024, remaining well above the recommended threshold of 20%. Bihar, Madhya Pradesh, Punjab, West Bengal, Rajasthan and Kerala combined high deficits with heavy debt loads. The combined revenue deficit widened to 0.8% of GSDP from 0.7%, with Andhra Pradesh (-2.8%), West Bengal (-2.5%), and Punjab (-2.4%) posting the widest revenue gaps, while Jharkhand, Odisha and Uttar Pradesh ran surpluses.
Capital spending momentum declined, slipping to 2.2% of GSDP from 2.3% and falling short of the 2.9% budgeted target. Only Telangana, Karnataka and Haryana achieved their capex targets, down from six states the previous year. The most significant shift was in funding sources, as market loans financed 76% of state deficits by fiscal 2026, up from covering roughly half until fiscal 2017. Gross market borrowings jumped 19% to ₹12.76 trillion, with Telangana (+54.5%), Madhya Pradesh (+38.1%), and Tamil Nadu (+36.9%) leading the surge.
According to Crisil, the states covered by the study account for nearly 90% of India's GDP and total state revenue expenditure, and about 85% of total state capital outlay. The study concluded that last fiscal presents a story of uneven health, with revenue deficits edging higher, capex falling short of budgeted ambitions, and reliance on market borrowing increasing sharply. Crisil emphasized that these trends point to growing expenditure commitments while revenue growth remains uneven, highlighting the challenge for states to balance developmental priorities with fiscal prudence.
