Gujarat Leads India in Fiscal Discipline with Lowest Debt-to-GSDP Ratio

Gandhinagar : The National Council of Applied Economic Research (NCAER) has released a report highlighting Gujarat’s exemplary fiscal management, positioning it as one of the financially strongest states in India. As per report, Gujarat has reduced its public debt-to-GSDP ratio (in last 10 years) by 4.5%, the highest among India’s 21 major states. With a debt-to-GSDP ratio of just 18.2%, Gujarat stands out as having one of the lowest debt ratios among major states, showcasing disciplined governance and strategic economic planning.

Chief Minister Bhupendra Patel lauded this achievement in a post on X, stating, “I am happy to share that Gujarat has reduced its debt-to-GSDP ratio by 4.5%, the highest among all the largest 21 states of India, as per the paper released by NCAER economists. This is a testament to robust financial management and fiscal prudence by the Government of Gujarat under the visionary guidance of Hon’ble PM Shri @narendramodi ji”

The NCAER report emphasises Gujarat’s role as a leader in financial management and economic development, setting a benchmark for fiscal discipline and strategic economic planning. The report notes a commendable reduction in Gujarat’s debt-to-GSDP ratio from 18.9% in 2022-23 to 18.2% in 2023-24, even as many states have seen their debt levels rise. Gujarat has achieved this while maintaining an average interest rate on state securities at 7.5% with an average maturity of 7.4 years, demonstrating a balanced approach to fiscal responsibility and economic development.

According to the NCAER Working Paper ‘THE STATE OF THE STATES: FEDERAL FINANCE IN INDIA’ by Barry Eichengreen and Poonam Gupta, Gujarat, along with Odisha and Maharashtra, maintains a debt level below 20% of state GDP, significantly lower compared to states like Punjab (47.6%), where the ratio is nearly 50%. The paper emphasizes the importance of fiscal discipline, noting that without reforms, the financial disparity between states could widen.

Key Fiscal Indicators

– Financial Discipline: Gujarat demonstrates over 90% compliance with key fiscal parameters, including Revenue Deficit, Fiscal Deficit, and Outstanding Liabilities.

– Fiscal Deficit: The state’s average 10 year primary deficit remains notably low at 0.3% of GSDP.

– Economic Growth: Gujarat has achieved a 12% growth in GSDP, highlighting its commitment to economic advancement.

Gujarat’s approach to fiscal management ensures financial stability while fostering substantial economic growth, making it a prime destination for investment. This balance of controlled borrowing with economic expansion sets a precedent for other states.

The Reserve Bank of India’s (RBI) State Finances Report further corroborates Gujarat’s financial strength, with the spread over central government securities for Gujarat being among the smallest, reflecting strong investor confidence in the state’s fiscal health. The NCAER paper, analysing 21 major states, highlights significant variability in debt levels. Gujarat, alongside Odisha, West Bengal, and Maharashtra, demonstrates fiscal prudence, while most other states have experienced rising debt-to-GSDP ratios over the last decade. Gujarat’s disciplined financial management and continued economic momentum solidify its status as a leader in India’s economic landscape, reinforcing its pivotal role in the vision of Viksit Bharat by 2047.