West Bengal’s debt near 40% of GSDP, interest payments account for 21% of revenue, says NCAER paper

New Delhi: The Suvendu Adhikari-led BJP government in West Bengal faces an uphill task meeting the challenges posed by the state economy, with its debts estimated to be 40 percent of its Gross State Domestic Product (GSDP) in FY 2024-25.

A working paper prepared by the National Council of Applied Economic Research (NCAER) for Niti Aayog this month, has reiterated what economists and policy experts have said before—the state’s finances remain under stress, with outstanding liabilities staying well above the 28.4 percent average for all states.“West Bengal needs to strengthen fiscal discipline by containing the growth of outstanding liabilities and reversing the rising debt trajectory to restore long-term fiscal sustainability,” the paper states.

The paper, ‘The Fiscal Landscape of West Bengal: Performance, Challenges and a Roadmap for Consolidation’, examines the state’s finances between FY 2015-16 and FY 2024-25 and compares them with the average performance of all states and neighbouring Odisha.Interest payments absorbed an average 21 percent of the state’s revenue receipts between FY 2015-16 and FY 2024-25, whereas the corresponding average was 12.8 percent for all states and 4.8 percent for neighbouring Odisha.GSDP measures the total value of goods and services produced within a state and is used to measure the size of its economy.West Bengal is one of India’s most populous states, accounting for about 7.1 percent of the country’s projected population and 5.5 percent of national GDP. Its economy is consistently ranked among the six to eight largest in the country. However, it continues to remain smaller than Maharashtra, Tamil Nadu, Karnataka and Gujarat.The state’s fiscal deficit reached 4 percent of GSDP in FY 2024-25, while its revenue deficit stood at 2.4 percent. A fiscal deficit broadly refers to the gap between a government’s total expenditure and its receipts, excluding borrowings. A revenue deficit occurs when regular income is not enough to meet its regular expenditure.“Both the fiscal deficit and the revenue deficit have generally remained well above the corresponding all-state averages. Interest payments absorb a relatively large share of revenue receipts, reflecting a substantial debt-servicing burden and limiting the fiscal space available for developmental spending,” the paper stated.Revenue mobilisation remains a key challenge