Bihar tops states’ fiscal strain with 5.8% fiscal deficit, says Crisil | Economy & Policy News

Bihar ran up the widest fiscal deficit among India’s major states in 2025-26, at 5.8 per cent of gross state domestic product (GSDP), while Jharkhand posted the narrowest at 1.2 per cent, an analysis of 17 states released by Crisil on Tuesday showed.

 

Across the states studied, the combined fiscal deficit “remained elevated” at 3.2 per cent of GSDP, with 10 running deficits above 3 per cent, which was the same as a year earlier (FY25). Yet there were signs of improved fiscal marksmanship. “Thirteen met or bettered their fiscal deficit targets last fiscal, up from eight in fiscal 2025,” the study noted.

 
 

Deficits stayed particularly high in Madhya Pradesh, Tamil Nadu, Uttar Pradesh and Telangana, apart from Bihar, according to the study.

 

The study, titled “Seeing like a state”, is based on Comptroller and Auditor General (CAG) data. “Together, these states account for nearly 90 per cent of India’s gross domestic product (GDP; old series) and total state revenue expenditure, and about 85 per cent of total state capital outlay,” it noted.

 

The study flagged that debt remains a worry. Aggregate state debt rose to 29.2 per cent of GSDP (Budget Estimate) from 28.1 per cent in fiscal 2024, “remaining well above the recommended threshold of 20 per cent.” Bihar, Madhya Pradesh, Punjab, West Bengal, Rajasthan and Kerala combined high deficits with heavy debt loads.

 

The combined revenue deficit widened to 0.8 per cent of GSDP from 0.7 per cent, with 12 states in deficit against 11 a year earlier. Crisil ties the slippage to slower growth in revenue receipts rather than a spending surge. Andhra Pradesh (-2.8 per cent), West Bengal (-2.5 per cent) and Punjab (-2.4 per cent) posted the widest revenue gaps; Jharkhand, Odisha and Uttar Pradesh ran surpluses.

 

The study noted that capital spending lost some momentum, slipping to 2.2 per cent of GSDP from 2.3 per cent and falling short of the 2.9 per cent budgeted. Only Telangana, Karnataka and Haryana hit their capex targets, down from six states the previous year.

 

The starkest shift was in how states fund themselves. Market loans, which covered roughly half of state deficits until fiscal 2017, financed 76 per cent by fiscal 2026. Gross market borrowings jumped 19 per cent to Rs 12.76 trillion — against just 4.3 per cent growth in the Centre’s borrowings, “underscoring the growing fiscal pressure on states.” Telangana, Madhya Pradesh and Tamil Nadu led the surge, up 54.5 per cent, 38.1 per cent and 36.9 per cent, respectively.

 

“Viewed through the lens of state finances, last fiscal presents a story of uneven health. At the aggregate level, revenue deficits edged higher, capex fell short of budgeted ambitions and reliance on market borrowing increased sharply,” the study highlighted.

 

Crisil emphasised that together these trends point to growing expenditure commitments, even as revenue growth remains uneven.

 

“As states balance developmental priorities with fiscal prudence, the challenge will be not merely to spend more, but to spend sustainably,” it concluded.