The rising debt levels of Indian states, a silent crisis creeping across the nation’s fiscal landscape, have largely escaped the public’s attention, overshadowed by national politics and global events. Yet, this mounting financial burden, which has surged by 74% from ₹47.9 lakh crore in 2019 to ₹83.3 lakh crore in 2024, threatens to choke state economies and hit the common man hardest.
While the central government’s fiscal policies often dominate headlines, the states’ ballooning liabilities, driven by unchecked borrowing, warrant urgent discussion. States like Tamil Nadu, Uttar Pradesh, and Maharashtra lead the debt charts, with figures touching ₹8.3 lakh crore, ₹7.7 lakh crore, and ₹7.2 lakh crore, respectively, in 2024. This escalation stems from multiple factors.
Massive infrastructure projects, such as metro rails and highways, demand hefty upfront investments. Social welfare schemes—free electricity, farm loan waivers, and subsidies—further strain budgets. The COVID-19 pandemic exacerbated the situation, forcing states to borrow heavily to fund healthcare and economic relief amid revenue shortfalls. Low industrialisation in states like Bihar and West Bengal, coupled with fiscal mismanagement, has led to dependence on central grants and borrowing, pushing debt-to-GDP ratios to alarming levels.
For instance, West Bengal’s ratio stands at 39%, while Jammu and Kashmir tops the list at 51%. Why is this crisis flying under the radar? For one, state finances lack the glamour of national budgets or election manifestos. Media coverage often prioritises populist narratives over dry fiscal data, leaving citizens unaware of the ticking time bomb. Political discourse, too, sidesteps this issue, as parties focus on short-term vote-winning promises rather than long-term fiscal discipline.
The Reserve Bank of India’s warnings about rising state liabilities rarely make it to prime-time debates, and the complexity of debt-to-GDP ratios alienates the average voter. Meanwhile, state governments continue borrowing, issuing bonds that crowd out private sector investment and inflate interest payments, which siphon funds from critical services.
The impact on the common man is profound and insidious. High debt levels mean states allocate more to interest payments—Kerala, for instance, spends heavily on servicing debt, leaving less for education and healthcare. This squeezes public services, forcing families to bear higher out-of-pocket expenses for schooling and medical care. Rising debt also erodes investor confidence, increasing borrowing costs and slowing economic growth, which translates to fewer jobs and stagnant wages.
For the rural poor, trapped in cycles of borrowing from predatory lenders at exorbitant rates, state-level fiscal strain offers no relief—schemes promising freebies often fail to address structural issues like low income growth. Inflation, already a concern with fuel prices soaring, worsens as states struggle to fund subsidies, passing costs onto consumers. The youth, grappling with unemployment rates double the national average, face a future where fiscal constraints limit opportunities for skill development and job creation. The path forward demands accountability and transparency.
States must prioritise revenue generation through industrial growth and efficient tax collection, reducing reliance on borrowing. Fiscal discipline, as seen in Odisha with its low 12.7% debt-to-GDP ratio, offers a model—leveraging mineral resources and manufacturing to boost income. Public discourse must shift to include these issues, with media and civil society amplifying the risks of unchecked debt. Citizens, too, must demand prudent financial management over populist handouts.
Without action, the rising debt of Indian states will not just burden balance sheets but crush the aspirations of millions, leaving the common man to bear the weight of a crisis no one bothered to discuss.