Archive · 24 Jan 2026
RBI urges states to reduce debt
The Reserve Bank of India (RBI) has asked state governments to reduce their debt levels.
The RBI says that high debt can slow down investment and growth.
Right now, the total debt of all states is 28.1% of India's GDP, but it's expected to rise to 29.2% by the end of this year.
Some states have debt levels as high as 46.3% of their own GDP.
The RBI wants states to follow a clear plan to reduce their debt, just like the central government is doing.
The central government aims to bring its debt down to 50% of GDP by 2030-31.
The RBI also noted that many states are borrowing more money, which could make it harder for them to spend on important things like schools and hospitals.
Some states are also spending a lot on welfare programs, which the RBI says should be carefully checked to make sure they are helping people.
Overall, the RBI thinks that states need to be careful with their money to keep the economy growing.
RBI calls on states to reduce debt levels to boost investment and growth.
Total debt of all states expected to rise to 29.2% of GDP by end of 2025-26.
Several states have debt levels above 30% of their GSDP, with some as high as 46.3%.
Central government aims to reduce its debt-to-GDP ratio to 50% by 2030-31, urging states to follow a similar path.
High debt levels and increased market borrowings by states could impact their ability to invest in critical areas like education and healthcare.
- Who
- Reserve Bank of India (RBI) and state governments in India
- What
- RBI's call for states to reduce debt levels and manage fiscal deficits
- When
- Current fiscal year and projections up to 2030-31
- Where
- India, with specific focus on state-level finances
- Why
- To improve investment and growth prospects by reducing debt burdens and ensuring fiscal sustainability
- Debt-GDP Ratio of States
- 28.1% in March 2024, expected to rise to 29.2% by end of 2025-26
- Debt-GSDP Ratio Range
- 17.8% to 46.3% at end-March 2026
- Recommended Debt Limit for States
- 20% of GSDP
- Central Government Debt Target
- 50% of GDP by 2030-31
- States with Fiscal Deficit >3% of GSDP
- 16 states in 2025-26
- States with Fiscal Deficit >3.5% of GSDP
- 13 states in 2025-26
- Market Borrowings by States in 2025-26
- Rs 12.45 lakh crore
- States with High Debt-Service Ratio
- Capital expenditure less than 2% of GSDP
Sources
India’s demographic transition opens up ‘window of opportunity’ to move into higher growth trajectory: RBI study
State finances are exhibiting early signs of vulnerability: RBI report
RBI calls on states to follow Centre, frame ‘clear glide path’ to reduce debt
Union Budget 2026: 5 strategic pillars for India’s next economic leap
