Q. Which of the following factor/s is/are responsible for higher debt-GSDP ratio in States?
1.Declining Tax Revenue
2.High Revenue Expenditure
3.Significant Committed Expenditure
Select the correct answer using the code given below:

[A] 1 only

[B] 2 and 3 only

[C] 1 and 3 only

[D] .1, 2 and 3

Answer: D

According to a Reserve Bank of India(RBI) study, five states namely, Bihar, Kerala, Punjab, Rajasthan, and West Bengal figure among the most stressed states fiscally.

Exceeded Debt and Fiscal Targets: Among the ten states, Andhra Pradesh, Bihar, Rajasthan and Punjab exceeded both debt and fiscal deficit targets for 2020-21 set by the 15th Finance Commission (FC-XV).

Declining Tax Revenue: The own tax revenue of some of these states, viz Madhya Pradesh, Punjab and Kerala has been declining over time making them fiscally more vulnerable.

High Revenue Expenditure: The share of revenue expenditure in total expenditure of these states varies in the range of 80-90%.This results in poor expenditure quality, as reflected in their high revenue spending to capital outlay ratios.

Significant Committed Expenditure: Committed expenditure which inter alia includes interest payments, pensions and administrative expenses accounts for a significant portion (over 35 per cent) of the total revenue expenditure in some of these states.

High Discoms Losses: The combined losses of DISCOMs in the five most indebted states, viz Bihar, Kerala, Punjab, Rajasthan and West Bengal, constituted 24.7% of the total DISCOMs losses in 2019-20 while their combined long-term debt was 22.9% of the total DISCOM debt in 2019-20.

Source: Indian Express