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RBI State of State Finances report – New update
February 3 , 2026
20 hrs 0 min
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- Assam, Kerala, Tamil Nadu, West Bengal and Puducherry consistently reduced their debt by up to 4 percentage points since 2021.
- These States reduced their outstanding liabilities as a share of GSDP while keeping development expenditure intact, signalling fiscal prudence without compromising on welfare.
- West Bengal has the highest share of debt in Gross State Domestic Product (GSDP) at 39% as per the Fiscal 2025-26 Budget Estimates.
- Kerala cut its outstanding liabilities by 4.8 % points to an estimated 35.5% of its GSDP.
- Tamil Nadu’s debt stood at 29.2% of the GSDP.
- Assam had a 28% of GSDP in debt, and Puducherry, a Union Territory, at 26% of GSDP in 2025-26.
- While the States reduced the share of debt in comparison with the size of their economies, the ratio continued to stay above the FRBM Act prescribed limit of 20%.
- The social sector and capital outlay in the five states either declined marginally or stayed consistently below the overall number.
- All expenditures relating to revenue account, capital outlay and loans and advances are categorised into social services, economic services, and general services.
- While social and economic services constitute development expenditure, expenditure on general services is treated as non-development expenditure.
- Youthful States may harness their demographic dividend by strengthening human capital investments, intermediate States may balance growth priorities with early preparation for ageing, and ageing States may enhance revenue capacity alongside healthcare, pension and workforce policy reforms.
- While Kerala and Tamil Nadu have a fifth of the population above the age of 60.
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