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Fiscal populism, cash transfers by states risk crowding out growth-enhancing spending, affect India’s fiscal credibility: Economic Survey 2025-26
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The Indian Express
Fiscal populism, especially through unconditional cash transfers, in several states poses emerging risks by crowding out growth-enhancing capital expenditure, said the Economic Survey for 2025-26.
Out of this, 10 states slipped into revenue deficit from revenue surplus, five worsened their revenue deficit, and three managed to stay in revenue surplus although they witnessed a deterioration.
This led to an increase in revenue deficit of states to 0.7% from 0.1% of GDP in FY19.
Revenue deficit occurs when revenue expenditure is more than revenue receipts.
Qualitatively, revenue expenditure is less desirable as it is meant for committed expenditure like salaries, pension, as against capital expenditure which creates long-term assets like infrastructure, roads, factories etc.