States should focus on fiscal consolidation and improving quality of expenditure: RBI Guv Das
Reserve Bank of India Governor Shaktikanta Das on Thursday stressed the need for states to focus on fiscal consolidation and quality of spending and focus on fiscal consolidation and quality of spending.
at 33Research and development The Conference of State Finance Ministers, Das also emphasized the importance of issues related to the financial health of states such as contingent liabilities/guarantees, among others.
Debt capacity
The governor highlighted the importance of debt sustainability to ensure the states’ long-term fiscal health.
The meeting reviewed, among others, market loans by the States, administration of the Consolidated Sinking Fund and Security Recovery Fund, matters relating to State Government guarantees, short-term financial facilities to the States from the Reserve Bank, etc.
production capacities
MD Patra, in his introduction to RBI’s annual newsletter entitled State finance: studying budgets (January 2023), that increased allocations to sectors such as health, education, infrastructure, and green energy transition could help expand productive capacities if countries mainstream capital planning rather than treating them as leftovers and first stops for cuts to meet budget targets.
“It is useful to consider the establishment of a capital expenditure reserve fund during good times when revenue flows are strong so as to facilitate and maintain quality spending and flows throughout the economic cycle.
“To mobilize private investment, state governments may continue to focus on creating an enabling ecosystem for the private sector to thrive,” Batra said.
Countries also need to encourage and facilitate trade and business between countries to take full advantage of the spillover effects of government capital expenditures across the country.