State Budget
West Bengal pegs FY26 fiscal gap at 3.6%, over Centre's mandate for 2nd yr in a row
This story was originally published at 06:00 IST on 13 February 2025
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NEW DELHI – For the second successive year, West Bengal is set to breach the fiscal deficit limit mandated by the Centre for states with its Budget for 2025-26 (Apr-Mar) projecting a fiscal deficit of 3.60% of Gross State Domestic Product. The central government, in line with the recommendations of the Fifteenth Finance Commission, in its Budget for FY24, lowered the fiscal deficit limit for states to 3.5% of GSDP, wherein 0.5% is linked to power sector reforms.
The West Bengal government, in its Budget for FY26 presented Wednesday, revised the state's estimate for fiscal deficit for the current fiscal year to 4.02% of GSDP. The Budget for FY25 had already projected a fiscal deficit 26 basis points higher than the Centre's mandate. At 3.27% of GSDP, West Bengal's fiscal deficit was within Centre's mandate in FY24.
The West Bengal government in its Fiscal Responsibility Budget Management Statement has mentioned that its key focus areas are reducing revenue deficit and fiscal deficit, and ensuring prudent debt management. However, the state's quality of expenditure has deteriorated with revenue deficit set to rise to 2.38% of the GSDP in FY25 from the Budget estimate of 1.76% of GSDP. West Bengal's Finance Minister, Chandrima Banerjee, has pegged revenue deficit for FY26 at 1.74% of GSDP.
The debt-to-GSDP ratio of West Bengal has also been showing a rising trend. For FY25, it is 38.93% in the revised estimate, against 38.19% in the Budget estimate. The state's debt was 38.39% of GSDP in FY24 and 37.89% in FY23. Banerjee has pegged the debt-to-GSDP ratio at 37.98% in FY26.
In absolute terms, West Bengal's fiscal deficit is set to expand 7% to INR 730.18 billion in FY25 from the initial estimate. The state is expected to report a fiscal deficit of INR 731.78 billion in the next fiscal year.
West Bengal's fiscal deficit is likely to expand over the expectation in FY25, primarily due to some shortfall in revenue. The state has revised its revenue receipts down to INR 2.28 trillion from INR 2.36 trillion, with the grants-in-aid from the Centre 18% lower than the Budget estimate, and the state's own tax revenue 2.4% lower.
The eastern state has also cut the FY25 revised estimate for non-tax revenue by 48% from the Budget estimate. On the other hand, it has revised up the estimate for share in Union taxes and duties for FY25 to INR 960 billion from the Budget estimate of INR 929 billion.
For FY26, West Bengal has pegged its revenue receipts at INR 2.66 trillion, which include INR 1.13 trillion from state's own tax revenue and INR 1.07 trillion from share in Union taxes and duties. Interestingly, after revising down the estimate for non-tax revenue by 48% in the current year, the state government has nearly tripled its Budget estimate to INR 93.60 billion in FY26.
On the expenditure side, West Bengal's capital expenditure is seen falling 10.2% in FY25 to INR 609.92 billion. Finance Minister Banerjee has pegged the capital expenditure for next fiscal year at INR 728.19 billion.
The state's revenue expenditure for the current year is slightly higher at INR 2.71 trillion from the previous estimate of INR 2.68 trillion. For next year, the revenue expenditure is likely to be INR 3.01 trillion.
West Bengal will raise INR 819.72 billion from the bond market in FY26 to fund its fiscal deficit and repay old loans. For the current year, the state has marginally raised the gross borrowing estimate to INR 800 billion from INR 797 billion in the Budget estimate. The state government had raised INR 699 billion on gross basis in FY24. End
Reported by Krity Ambey
Edited by Deepshikha Bhardwaj
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