RBI cautious on state finances again

quot;Many State governments have taken initiatives to raise tax and non-tax revenues to stem the persistent deterioration in the revenue account. Nonetheless, the revenue deficit is expected to widen to Rs 43,236 crore in 1999-2000 as compared to Rs 40,539 in the previous year. This is on account of a steep rise expected in the States8217; revenue expenditure 8211;particularly the non-developmental revenue expenditure, which is expected to rise by 24.1 per cent,quot; the RBI annual report said.

The apex bank reportcautioned that the increasing burden of interest payments will weigh very heavily on State finances. quot;State governments can no longer rely on SLR obligations to satisfy their market borrowing programme at concessional rates and have to borrow at market-related interest rates,quot; RBI said, adding that the the reform of state finances has gained significance with their fiscal deficit reaching an unsustainable level of 4.3 per cent of GDP in 1998-99.