Journalism of Courage
This is an archive article published on June 3, 2025
Top 10 Indian states and UTs with the highest debt-to-GDP ratios in FY 2025–26
Indian States and Union Territories with highest debt levels in 2025–26: Jammu and Kashmir tops the list with a debt-to-GDP ratio of 51%, while Odisha records the lowest at just 12.7%.
India state-wise debt-to-GDP ratio in FY 2025-26 (Shutterstock)
Top Indian States/UTs by debt-to-GDP ratio FY 2025–26: India is currently the fastest-growing large economy in the world. Recently, it surpassed Japan to become the fourth-largest economy globally and is projected to overtake Germany within the next 2.5 to 3 years, according to NITI Aayog CEO B.V.R. Subrahmanyam.
While the Indian economy is growing and thriving, the recent IMF and Fiscal Monitor debt-at-risk analysis revealed that the country’s debt-to-GDP ratio is 80.4% globally.
Indian central government, in a significant shift, has recently outlined a transition to using the debt-GDP ratio as the fiscal anchor from the 2026-27 financial year, as it aims for a decreasing debt-GDP ratio of 50±1 per cent by March 31, 2031.
According to the report, Jammu and Kashmir leads the list with 51% debt-to-GDP, the highest among all states. It is followed by Arunachal Pradesh, a relatively small state economy, having an exceptionally high fiscal deficit (8.9%).
Notably, the northeastern states of India—Nagaland, Mizoram, Sikkim, and Meghalaya—feature prominently in the list, showing structural fiscal imbalances driven by economic disparities, limited industrialisation, rugged terrain, and sparse population.
On the contrary, Odisha tops the list with the lowest debt-to-GDP ratio (12.7%), reflecting strong fiscal discipline, good revenue mobilisation from mining and the growing manufacturing sector, and effective expenditure control.
The largest states in terms of GDP—Maharashtra (18.4%), Gujarat (15.3%), Karnataka (24.9%) and Tamil Nadu (26.1%)—have maintained moderate debt levels with sustainable fiscal policies.
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Top 10 Indian States by Debt-to-GDP Ratio (FY 2025-26)
| Rank | State | Debt-to-GDP (%) |
Fiscal Deficit (%)
|
| 1 | Jammu & Kashmir | 51 | 5.6 |
| 2 | Nagaland | 47.8 | 3 |
| 3 | Arunachal Pradesh | 45.9 | 8.9 |
| 4 | Punjab | 44.5 | 3.8 |
| 5 | Himachal Pradesh | 40.5 | 4 |
| 6 | Mizoram | 38.8 | 4.6 |
| 7 | Sikkim | 38.2 | 5.8 |
| 8 | West Bengal | 38 | 3.6 |
| 9 | Meghalaya | 37.6 | 3 |
| 10 | Bihar | 37 | 3 |
Source: GDP and debt-to-GDP figures are based on 2025–26 budget estimates, sourced from PRS Legislative Research and compiled by Forbes India.
Note: The debt-to-GDP ratio is a crucial economic metric for assessing a country or state’s ability to manage its debt and overall economic health. High ratios could indicate long-term fiscal issues, constrain development investment, and raise concerns about debt sustainability.
Methodology: The debt-to-GDP ratio of Indian states is derived by dividing the total outstanding debt of a state by its GDP and multiplying by 100 to get a percentage. Here is the formula: The debt-to-GDP ratio for states is calculated as (total state debt/state GDP) * 100.
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