Archive · 28 Jan 2026
India's Fiscal Health Improves with Demographic Challenges
The Indian government's financial health is getting better.
The total money they owe has gone down, and they are borrowing money to spend on big projects.
Different states in India have different numbers of old and young people, which affects how they spend money.
Some states have more young people and can spend more on education and jobs.
Other states have more old people and need to spend more on healthcare and pensions.
This means each state needs different money plans.
The government is also thinking about how to share money fairly between states based on these differences.
The fiscal health of state governments in India is improving, with a consolidated gross fiscal deficit of 3.3% of GDP in 2024-25.
Total outstanding liabilities of states declined from 31% of GDP in 2020-21 to 28.1% in 2023-24.
Indian states are at different stages of demographic transition, affecting their fiscal policies and challenges.
Youthful states have more opportunities for revenue mobilization, while ageing states face fiscal pressures from shrinking tax bases and rising committed expenditure.
The RBI study highlights the need for differential fiscal policies based on the demographic profiles of states.
- Who
- Indian State Governments
- What
- Improving fiscal health and demographic challenges
- When
- 2024-25 and beyond
- Where
- India
- Why
- To address varying demographic transitions and fiscal policies
- Consolidated Gross Fiscal Deficit
- 3.3% of India's GDP in 2024-25
- Total Outstanding Liabilities of States
- 28.1% of GDP at the end of 2023-24
- Old-Age Dependency Ratio
- 14% in Bihar to 30% in Kerala
- Fiscal Deficits as a Proportion of GSDP
- 8% in Arunachal to less than 3% in Gujarat
- Special Assistance Scheme for Capital Investment
- 50-year interest-free loans from the Centre
Sources
How Centre’s Capital Expenditure Likely To Cross Rs 12 Lakh Crore In FY27
Budget 2026: Capex can cross ₹12 trillion; minor income tax benefits possible, says Sunny Agrawal of SBI Securities
Demographic gaps: Why different states need different budget allocations as they age
Senior BJP leader Sanjay Tandon Confident of Transformative Union Budget-2026-27 on Feb 1
