Mumbai: The states' fiscal deficit will rise only marginally to 3.3 percent in fiscal year 2017-18 from the expected 3.2 percent in 2016-17, domestic ratings agency India Ratings and Research (Ind-Ra) said on Monday.
"The aggregate fiscal deficit of Indian states is expected to increase marginally to 3.3 percent of gross domestic product (GDP) in FY18 from the forecast of 3.2 percent for FY17," it said in a note.
The aggregate states' GDP to debt ratio will also go up marginally to 24.3 per cent in FY18 from 24 percent in FY17, it said.
On the crucial indirect tax reform Goods and Services Tax, the agency said it expects an implementation by July 2017 and added that the proposed compensation of INR500 billion by the central government to state governments to cover revenue losses post tax implementation will be sufficient.
It said demand for petroleum products is expected to grow 9.5 percent in FY18 and states with a higher proportion of revenue from petroleum products in own tax revenue to benefit from the increase in crude oil prices.
The aggregate capital expenditure to GDP ratio of states is expected to remain stable at 3.4 percent in FY18, which is the same as in FY16 and FY17, it said.
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