PM Narendra Modi bats for simultaneous elections, changing fiscal to January-December

The prime minister called for carrying forward the debate and discussions on holding simultaneous elections to Parliament and state legislatures.

Prime Minister Narendra Modi today pitched for conducting simultaneous elections to the Lok Sabha and the state assemblies and shifting to a January-December fiscal year. Addressing the Niti Aayog Governing Council’s third meeting, which was attended by several state chief ministers, Modi said for long, India had suffered from economic and political mismanagement. “Because of poor time management, many good initiatives and schemes had failed to deliver the anticipated results,” he said, adding there is a need to develop robust arrangements that could function amidst diversity.

The prime minister called for carrying forward the debate and discussions on holding simultaneous elections to Parliament and state legislatures. On the Goods and Services Tax (GST), Modi asked the states to make legislative arrangements “without delay” for the rollout of the indirect tax regime from July 1. The GST, which will subsume central excise, service tax, Value Added Tax (VAT) and other local levies, is scheduled to be rolled out from July 1.

The consensus on GST reflects the spirit of ‘one nation, one aspiration, one determination’, Modi earlier said in his opening remarks at the meeting. Referring to the change in the budget dates, he said in a country where agricultural income is exceedingly important, budgets should be prepared immediately after the receipt of agricultural incomes for the year. He added that there have been suggestions to follow January to December as financial year.

The prime minister asked the states to take the initiative in this regard. Currently, India follows April-March as fiscal year. Later, briefing reporters about the meeting, Niti Aayog vice chairman Arvind Panagariya said the prime minister wants that “we should think of January-December financial year as this is appropriate from the point of view of farmers”.

Modi also urged states, local governments and NGOs to decide goals for 2022 and work in mission mode towards achieving them. Referring to the issue of regional imbalance, which was raised by a number of chief ministers, Modi said the matter needs to be addressed on priority, both nationally, and within states. He also called upon states to “speed up capital expenditure and infrastructure creation” to spur growth.

“Niti Aayog is working on a 15-year long term vision, 7-year medium-term strategy, and 3-year action agenda,” Modi said, adding the vision of ‘New India’ can only be realised through the combined efforts and cooperation of all the states. The draft of the three-year action plan was circulated at the meeting and would be finalised after seeking comments of the chief ministers.

Stating that poor infrastructure in the country is hampering the economic development, Modi said that more expenditure on basic infrastructure such as roads, ports, power and rail would help in accelerating the pace of growth. The meeting of the Governing Council at the Rashtrapati Bhavan was attended by several chief ministers, including from non-BJP ruled states like Punjab, Bihar, Tripura and Karnataka.

The notable absentees were West Bengal Chief Minister Mamata Banerjee and Delhi Chief Minister Arvind Kejriwal. The council, which is the apex body of the Niti Aayog, is headed by the prime minister and includes all chief ministers and the Aayog’s members.

A justice more complete

SC promises closure in Babri demolition case. But what of the perils of memory and age, the problem of delay?

It is said that the mills of God grind slowly but they grind fine. This is true of human law and justice as well. The Supreme Court of India very recently ruled that it was justified to act under the constitutional mandate to do complete justice and restart the criminal justice process against senior BJP leaders and cadres in the Babri Masjid demolition case, despite the lapse of a quarter-century.

It clubbed all the cases to Additional Sessions Judge (Ayodhya Matters) at Lucknow; it restored conspiracy charges against some leaders, which were earlier dismissed, and ordered that the judge shall complete the trial within two years. It also directed that the judge would not be transferred in this period and may receive the completed testimony of all those who have testified before a Rae Bareli court.

There is already a thriving political discourse around this decision. Some commentaries speculate about why the present regime allowed the CBI appeal against a 2010 high court order, overlooking the Supreme Court observation that the agency was like a “caged parrot”. Almost everyone then agreed that the agency should act autonomously — now it stands indicted when it seems to act relatively autonomously! But the pundits are undeterred. Some say that the revival of prosecution for conspiracy was a way to control intra-party rivalry, to eliminate L.K. Advani as a presidential candidate. Some others take the view that the two year period coincides with the prospects in the next general election.

The Supreme Court, correctly, was not concerned with all this. What mattered were the legal principles and juristic interpretation, not political motives or fallout. Proper trial, conviction, and acquittals were necessary lest “the secular fabric of the Constitution” be ever torn. Although the apex court does not say this expressly, it takes seriously all threats to the structure and essential features of the Constitution — a judicial doctrine limiting Parliament’s otherwise plenary powers to amend the Constitution.

How far the court’s power to do complete justice should go was a principal juristic question in this case. The court held that the rights to free and fair trial were not affected by lateral transfer from one court to another. No right to appeal to a higher court was here entailed, as it is in situations of a vertical transfer. But the scope of Article 142(1), the power to render complete justice, was severely contested.

Justices Rohinton Nariman and Pinaki Chandra Ghose explicitly agree that the power to do complete justice merely supplements the enacted law and does not supplant it. But it is an unusual power, not having “any counterpart in any other Constitution world over”. The Latin maxim fiat justitia ruat cælum (let justice be done even if the heavens fall), the court ruled, “is what first comes to mind on a reading of Article 142”.

The power under Article 142(1) is “very wide” and is to be exercised with due care and caution, as an affair of equity and not of strict law.

K.K. Venugopal argued strenuously that the Supreme Court’s power is “circumscribed” by Section 406 of the CrPC that authorises transfer only from a criminal court subordinate to one high court to another criminal court of equal or superior jurisdiction. But their Lordships ruled that “clearly” that section “does not apply” to the present case “as the transfer is from one criminal court to another criminal court, both subordinate to the same high court”.

However, we must await an uncertain future in search of an answer to the question: May a high court’s power to transfer cases be affected by Article 142(1)? The court offers a welcome clarification: Unlike Article 141 (the law declared by the Supreme Court shall be binding on all courts within the territory of India), Article 142 declares no binding law. SC judgments have “two components — the law declared which binds courts in future litigation between persons”, and the “doing of complete justice” in any cause or matter which is pending before it.

It is, in fact, “an article that turns one of the maxims of equity on its head, namely, that equity follows the law”. But were this inversion to be wholly correct, may the SC do “complete justice” without regard to any binding law, other than the law declared by it? Surely, this perspective requires further constitutional chastening.

The decision is also interesting for its handling of the issue of judicial delay. The SC squarely holds the CBI responsible for not appealing against governmental orders that refused, contrary to the high court judgment of February 12, 2001, to cure a technical error in notification. It also holds the state responsible for not so doing.

Yet, it also seems that the SC failed to act when a SLP filed by one Mohd Aslam alias Bhure on February 12, 2001, stood dismissed (November 29, 2002). Dismissed also was the review by a speaking order (March 22, 2007) and a curative petition (on February 12, 2008). But given the concern over judicial delay, one may ask: Why so? Does not the maxim fiat justitia extend to all, including social action litigation matters? The task of the examination of 656 witnesses within 564 working days seems uphill, but it now stands mandated by the apex court.

No one is held guilty of violation of the law. Constitutional propriety raises the question of whether high constitutional dignitaries should resign their offices — a question that seems left to the incumbents. They may, or may not, follow the dictates of the Rajdharmaparva of the great Mahabharata.

Fiat justitia is the cardinal maxim of law and justice in situations of mass violence and criminality. From Nuremberg onwards, genocide, ethnic cleansing and other war crimes are tried regardless of law’s delays. While some debate whether desecration of constitutional secularism is a comparable radical evil, and others celebrate the promise of justice, the perils of memory and age, and the problematic of inter-generational justice also need urgent attention.

ONGC plans $11 billion investment to boost gas production by 30%

ONGC plans to put into production its gas blocks in the KG Basin and Ratna and R-Series oilfields in Mumbai offshore by 2019

After more than a decade of nearly static output, state-run Oil and Natural Gas Corp. (ONGC) expects to increase gas production by nearly 30% over the next three-four years with an investment of around $11 billion, according to two senior company officials with knowledge of the matter.

The officials said ONGC will put its blocks in the Krishna Godavari basin (KG-DWN-98/2) and Ratna and R-Series oilfields in Mumbai offshore into production by 2019. The coal bed methane (CBM) blocks in Jharkhand will begin production by 2020, while the Daman offshore fields, which have been pressed into production this month, will be ramped up next year.

“Our production has been stagnant but some discoveries are in the pipeline. In the next three-four years gas production for ONGC should be up by 30%,” the first ONGC official cited above said on condition of anonymity.

He said, while KG-DWN-98/2 will be pushed into production by 2019, Daman will begin production shortly and be ramped up by 2018.

ONGC currently produces around 23 billion cubic metres (bcm) of gas a year, which is expected to go up to 29-30 bcm in four years. However, gas production at some existing fields is projected to drop to 11.8 bcm in four years from the current 19.73 bcm.

The first official said given that production from the existing fields is declining, some part of the fresh gas production would go toward compensating that loss.

ONGC did not reply to an email sent on 13 April.

The company plans to invest more than $10-11 billion in exploration, a major chunk of which would go towards developing the KG block. It plans to develop KG-DWN-98/2 in three clusters, said the first official cited above.

The ONGC board last month approved the field development plan for fields falling under Cluster II, the first cluster to be developed. The development will involve a capital expenditure of $5.08 billion, ONGC said in a statement on its website. Cluster II will produce its first gas by June 2019, according to the statement.

The Ratna and R-series fields, lying 130km off the Mumbai coast, will be put to production from 2019. The fields were returned to ONGC last March, 22 years after they were awarded to Essar Oil. The Ratna and R-series oil fields hold an estimated 87 million barrels of oil and 1.2 bcm of gas reserves.

Last fiscal, ONGC drilled 501 wells against 386 in 2015-16. The second official quoted above said the company has achieved this number for the first time in more than two decades. “Success of drilling will ensure establishment of newer resources and augment production,” he added. ONGC spent Rs15,747 crore in drilling these wells.

The Daman offshore project, which will begin production from this month end or early next month, will contribute around 2 to 3 million metric standard cubic metres per day (mmscmd) of gas from May.

Phase II of the Daman project will be completed by next May and would add another 3 mmscmd to overall production. Total production would be ramped up to 8 mmscmd by 2020.

“ONGC has become quite aggressive on its discoveries and production, something that was lacking thus far. At a time when the government is pushing to bring down natural gas imports by 10%, it bodes well for ONGC and its prospects going forward,” said an oil and gas analyst with a Mumbai-based broking firm, speaking on condition of anonymity as he is not allowed to speak to the media. 

ONGC has also started work on its coal bed methane (CBM) project. Methane is a form of natural gas extracted from coal beds. “Land acquisition for the project has been completed. By September, we would begin the drilling and then once we have sufficient number of wells, we can put them into production,” said the second official quoted above.

ONGC holds four CBM blocks. Two—North Karanpura and Bokaro in Jharkhand—will start production by the second half of 2017-18. Production after the development of all four blocks is estimated to be about 1.7 mmscmd.

The company has sold a 25% stake in its North Karanpura CBM block to Prabha Energy Pvt. Ltd, a unit of Deep Industries Ltd. The block in Bokaro will be developed by ONGC.

The explorer also plans to begin work shortly on the high-pressure high temperature Deen Dayal West field in which it acquired 80% from Gujarat State Petroleum Corp. this February for $1.2 billion.

New types of blood cells discovered

The cells are new classes of types of white blood cells called dendritic cells and monocytes, researchers said

cientists, including those of Indian origin, have identified new types of blood cells in the human immune system. The cells are new classes of types of white blood cells called dendritic cells and monocytes, researchers said.

Researchers, including Rahul Satija from New York University and Karthik Shekhar from Broad Institute of MIT and Harvard in the US, identified two new dendritic cell subtypes and two monocyte subtypes. They have also discovered a new dendritic cell progenitor.

Researchers used a technique called single-cell genomics to analyse gene expression patterns in individual human blood cells. Previously, different types of immune cells were investigated and defined by the set of marker proteins that they express on their surface.

This new technique is much more powerful and can reveal previously unrecognised and rare cell types that would be otherwise difficult to find. Dendritic cells display molecules called antigens on their surfaces. These molecules are recognised by T cells which then mount an immune response. Monocytes are the largest type of white blood cell and can develop into macrophages that digest debris in our cells.

“Two important white blood cell types in our bodies help defend us from infection - dendritic cells and monocytes,” said Divya Shah, from Wellcome Trust’s Infection and Immunobiology team. “In this study, scientists have used cutting-edge technologies to find that there are many more types of cell than we originally thought.

“The next step is to find out what each of these cell types do in our immune system, both when we’re healthy and during disease,” said Shah. The finding was published in the journal Science.

Nasa’s Cassini spacecraft sets up Saturn ‘grand finale’

Cassini’s fuel tank is practically empty, so with little left to lose, Nasa has opted for a risky, but science-rich grand finale

Nasa’s Cassini spacecraft faces one last perilous adventure around Saturn.

Cassini swings past Saturn’s mega moon Titan early Saturday for a gravity-assisted, orbit-tweaking nudge.

“That last kiss goodbye,” as project manager Earl Maize calls it, will push Cassini onto a path no spacecraft has gone before — into the gap between Saturn and its rings. It’s treacherous territory. A particle from the rings — even as small as a speck of sand — could cripple Cassini, given its velocity.

Cassini will make its first pass through the relatively narrow gap on Wednesday. Twenty-two crossings are planned, about one a week, until September, when Cassini goes in and never comes out, vaporizing in Saturn’s atmosphere.

Launched in 1997, Cassini reached Saturn in 2004 and has been exploring it from orbit ever since. Its European travelling companion, Huygens, landed on Titan in 2005. Cassini’s fuel tank is practically empty, so with little left to lose, Nasa has opted for a risky, but science-rich grand finale.

A computer artist’s rendering of Cassini spacecraft. Photo: Reuters/Nasa

“What a spectacular end to a spectacular mission,” said Jim Green, Nasa’s planetary science division director. “I feel a little sad in many ways that Cassini’s discoveries will end. But I’m also quite optimistic that we’re going to discover some new and really exciting science as we probe the region we’ve never probed before.”

There’s no turning back once Cassini flies past Titan, Maize said. The spacecraft on Wednesday will hurtle through the 1,200-mile-wide gap (1,900 kilometers) between Saturn’s atmosphere and its rings, at a breakneck 70,000-plus mph (113,000 kph).

From a navigation standpoint, “this is an easy shot,” Maize said. The operation will be run from Nasa’s Jet Propulsion Laboratory in Pasadena, California. The concern is whether computer models of Saturn’s rings are accurate. On a few of the crossings, Cassini is “kind of flirting with the edge of where we think it’s safe,” he noted.

For at least the first trip through the gap, Cassini’s big dish antenna will face forward to shield the science instruments from any ring particles that might be lurking there. A couple instruments will provide a quick rundown on the dust situation.

Scientists anticipate lots of lightweight impacts, since the spacecraft will be going through extremely small material, more like smoke than distinct particles. Material from the innermost D ring — which is slowly extending into Saturn — should be diffuse enough “that we should be fine,” Maize said.

If the models are wrong and Cassini is clobbered by BB-size material, it still will end up exactly where Nasa is aiming for on 15 September — at Saturn. The space agency wants to keep the 22-foot-high, 13-foot-wide spacecraft away from Titan and its lakes of liquid methane and from the ice-encrusted moon Enceladus and its underground ocean and spouting geysers. It doesn’t want to shower contaminating wreckage onto these worlds that might harbour life.

This last leg of Cassini’s 20-year, $3.27 billion voyage should allow scientists to measure the mass of the multiple rings — shedding light on how old they are and how they formed — and also to determine the composition of the countless ring particles. First spotted by Galileo in 1610, the rings are believed to be 99% ice; the remaining 1% is a mystery, said project scientist Linda Spilker. A cosmic dust analyzer on Cassini will scoop up ring particles and analyze them.

“Imagine the pictures we’re going to get back of Saturn’s rings,” Spilker said.

Cassini will have the best views ever of Saturn’s poles, as it skims its surface. Near mission’s end, Spilker said, “we’re actually going to dip our toe” into Saturn’s atmosphere, sending back measurements until the last possible moment.

All this is on top of a science mission that already has rewritten the textbooks on the Saturnian system.

“But the best is still yet to come — perhaps,” Maize said at a news conference in early April. “But we are certainly going to provide more excitement.”

The relationship between economics and politics

As election outcomes are apparently random, elected politicians have no incentive to deliver good economic performance on their watch

ecent political developments in India, in particular the choice of Yogi Adityanath as the chief minister of Uttar Pradesh after the Bharatiya Janata Party’s (BJP’s) thundering victory in that state’s recent election, has again cast light on an evergreen question in the Indian political economy: What is the relationship of economic performance and a party’s electoral prospects? Does good economics help assure, if not guarantee, an incumbent party’s re-election chances, or do these hinge rather on non-economic considerations, such as the pursuit of a social or cultural agenda?

Unfortunately, fables, morality tales and armchair narratives have typically substituted for evidence-based analysis of these questions. Thus, it is frequently asserted that the BJP-led government lost the general election in 2004 because of a backlash from poor and rural voters against its triumphalist “India Shining” campaign. Likewise, it is asserted that it was the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), appealing to the selfsame rural poor, which helped win re-election for the Congress-led government in 2009. As it happens, neither of these narratives can be confirmed by data.

Thus, on the former, as Rupa Subramanya and I argued in our 2012 book, Indianomix: Making Sense Of Modern India, the most parsimonious explanation for the BJP’s defeat in 2004 is that the close election was a coin-toss and they came up the losers. Any specific hypothesis to explain their defeat—whether India Shining, middle-class apathy, poor alliance choices, or old-fashioned anti-incumbency—could well hold some truth at the margin but none of them can be conclusively established by data as the sole, or even the most important, explanation. Likewise, a data analysis of the 2009 election by political economist Praveen Chakravarty shows that neutralizing for all other effects, most crucially for pre-poll alliances, there is no statistically meaningful relationship between the Congress vote share and the level of MGNREGA spending across constituencies. Similarly, there is no statistically significant evidence that the Congress vote share went up between 2004 and 2009 in constituencies with higher MGNREGA spending. This data analysis thus busts yet another morality tale.

The reality is that when hundreds of millions of people vote in a complex election with many issues at play, there is an ineluctable element of randomness in the final outcome, which aggregates across the preferences of all these individuals. The attempt to anthropomorphize all these hundreds of millions of differently motivated individuals into one representative voter with a specific motivation is doomed to failure.

Debunking simplistic narratives is one thing, but does a rigorous, data-based analysis show any relationship, in the aggregate, between good economic management by incumbent governments and their subsequent re-election prospects? Here, too, evidence is mixed. For instance, a recent Mint analysis by Pramit Bhattacharya and Tadit Kundu (“Does Good Economics Make For Good Politics In India?”, 24 March) analyses all the assembly elections after 2001 in 18 major states, dividing the states into three buckets: moderate incumbency, strong incumbency, and anti-incumbency. In the former two categories, there is some correlation between incumbency and higher growth rates during the incumbency period, while the relationship is weaker in the anti-incumbency states. Of course, correlation does not prove the existence of a causal relationship, suggestive though it may be.

Other recent research, cited in the Mint analysis referred to above, also appears to suggest India’s fabled anti-incumbency may be weakening, with incumbents more likely to be rewarded for good economic stewardship in the past decade than was the case in previous years. Yet such findings are very fragile in a statistical sense.

Thus, the more basic point, which I argued some time back (“Do Indian Voters Really Care For Economic Growth?”, Mint On Sunday, 29 November 2015), is that selection of data, time period and methodology can yield very different and even confounding results.

Thus, Chakravarty analyses assembly elections from 2004-14 in the 12 largest states—a different data set than in the recent Mint analysis—and finds no statistically meaningful relationship between economic performance (as measured by economic growth during time in office) and an incumbent government’s re-election prospects.

It is tempting but ultimately unhelpful to draw the nihilistic conclusion that as election outcomes are apparently random, elected politicians have no incentive to deliver good economic management (which hopefully translates into good economic performance) on their watch. For, if it is difficult to prove that good economics is good politics, it is equally difficult to prove that bad economics is good politics. In other words, once elected, a politician of conviction, freed from the notion that there is some strong provable relationship between what they do while in office and their re-election prospects, may be guided to do what they believe is right, simply because it is the right thing to do.

The relationship between good economics and good politics may, ironically, come down to morality in the end.

State governments driving fiscal expansion in India

The rising concerns over the growing deficits of states are reflected in the widening spread between state development loans (SDLs) and Central government bonds

Ever since the Fiscal Responsibility and Budget Management Act (FRBM) was introduced in India, state governments have largely been conservative spenders, limiting their spending far more effectively than the Union government. This trend seems to be reversing in recent years, with the aggregate fiscal deficit of states rising at a time when the aggregate fiscal deficit of the Union government has been declining.

Overturning years of fiscal conservatism, Indian states have become much more profligate than before, a Mint analysis of major state budgets show. These states, accounting for 86% of India’s gross domestic product (GDP) and 76% of the country’s population, have witnessed their aggregate gross fiscal deficit rising sharply to around 3.2% of India’s GDP in 2016-17, significantly higher than the budget estimates of 2.8%. The analysis uses final (actual) budget figures where available, and relies on revised estimates where such actuals are not available.

As the chart below shows, the aggregate fiscal deficit of states has been trending upwards over the past few years. At a time when the Union government has been bringing down its fiscal deficit-GDP ratio, state governments seem to be on an expansionary mode.

The sharp deterioration in state finances over the past couple of years is partly because of the restructuring of state-run power utilities under the Ujwal Discom Assurance Yojana (UDAY).

For instance, one of the states which posted a sharp increase in its fiscal deficit in the just-ended fiscal year was Madhya Pradesh, which saw its deficit rising from 2.5% of gross state domestic product (GSDP) in 2015-16 to 4.7% in 2016-17. A recent analysis by PRS Legislative Research shows that Madhya Pradesh had to borrow Rs7,361 crore from the market last year on account of the UDAY scheme. This means that in the absence of UDAY, the deficit would have only risen from 2.5% of the GSDP in 2015-16 to 3.5% of the GSDP in 2016-17, instead of the actual 4.7% deficit. Similarly, Rajasthan’s huge deficit in 2015-16, amounting to more than 9% of GSDP, could be attributed in large part to the UDAY scheme.

While the UDAY scheme might have led to the sharp downturn in state finances, state government deficits would have worsened even without UDAY in 2016-17, as JP Morgan economists Sajjid Chinoy and Toshi Jain pointed out in a 22 February note on state finances.

While the debt created on account of UDAY is a one-time cost, the resultant increase in interest burden would persist in the coming years. States have as yet provisioned for only around 60 of the new interest liabilities arising out of UDAY in their budgets which means further fiscal slippages are likely, a recent report on state finances by the HSBC economists Pranjul Bhandari and Dhiraj Nim said. Besides, the HSBC report estimates that states’ increased wages and pension bill on account of their respective Pay Commission revisions could inflate their total deficit by another 0.2% of the GDP this year (2017-18).

The rising concerns over the growing deficits of states are reflected in the widening spread between state development loans (SDLs) and Central government bonds. As state government borrowings have increased, spreads have moved up. While markets may not be very selective when it comes to punishing state governments, treating fiscally responsible state governments and less responsible ones in similar fashion, market participants seem to be taking note of the rising risk profile of state governments as a whole.

Ironically, the deterioration in state finances has coincided with the implementation of the 14th Finance Commission recommendations, which have led to an increase in aggregate transfers from the Centre to the states.

Indeed the Centre to states transfers were more than expected (or budgeted) in 2016-17. However, they were offset by lower-than-expected own tax collections by the states (mainly indirect taxes) and higher-than-expected expenditure, leading to deficits exceeding the initial budget estimates for the year.

The excessive spending by states is not just on account of schemes such as UDAY or linked to pay and pension expenses. Aggregate deficits have gone up also because states have stepped in to invest in social infrastructure such as health and education. With the Centre is curtailing expenditure on these areas over the past few years, states have had to step in to fill the gap, raising spending on these sectors (more on this issue in the next part of this series).

The states which exceeded their deficit targets by the biggest margins of error were also generally the states with high deficits such as Bihar, Madhya Pradesh, Rajasthan and Tamil Nadu. The pattern in these states was more or less similar—less-than-expected tax collections and more-than-budgeted expenditure led to higher deficits.

Although state deficits or the net addition by states to public debt has been rising, states account for only a third of the overall public debt in the country. As the recent report of the FRBM review committee led by N.K. Singh pointed out, states not only have a much lower level of aggregate debt compared to the Centre, they also collectively run a revenue surplus (i.e., their aggregate current expenditure has been less than their aggregate revenue receipts) unlike in the case of the Centre. This is partly because of limited borrowing powers of the states (they often need approval from the Central government to undertake additional market borrowings).

The Singh committee recommends that the states “be allowed to maintain their debt GDP ratios at FY17 levels (i.e. 21% of GDP)” in the near future. However, states may contest this cap, given that their stock of debt is far lower than the Centre and their responsibilities have been rising over the years. It is also not clear how the cap on debt will apply to different states, with different levels of debt, and with different developmental needs. The 15th Finance Commission will likely grapple with these issues to find a debt path for states that is fair, equitable and sustainable.

Meanwhile, it will be important to keep a close watch on the deficit levels of states as the health of public finances in India will in great measure depend upon the performance of states. The upcoming pay commission hikes and the growing clamour for farm loan waivers across several states are likely to strain the already stressed finances of states.