States with revenue deficits may face fiscal stress: Centre

1 MAY 2026

The Union Finance Ministry has warned that States with revenue deficits and high debt burdens will find it harder to deal with fiscal shocks, including from the West Asia crisis, forcing them to either reprioritise expenditure away from productive areas, or approach the Centre for more funds at a time when it is trying to consolidate its own finances.
In its Monthly Economic Review for April 2026, the Department of Economic Affairs in the Ministry of Finnce said 9 of the 18 large States analysed were in revenue deficit as per their own projections for 2026-27. Also, 7 are projected to be revenue surplus, while 1 is in revenue balance.
The golden rule of fiscal financing is to maintain zero revenue deficit.
A revenue deficit is when expenditure on recurring items such as salaries, pensions, subsidies, and interest payments exceed the revenue earned from sources such as taxes and fees.
The States with projected revenue deficits as a percentage of their gross state domestic products (GSDP) are Himachal Pradesh (-2.4%), Punjab (-2.2%), Kerala (-2.1%), Andhra Pradesh (-1.1%), Rajasthan (-1.1%), Haryana (-0.9%), Karnataka (-0.7%), Maharashtra (-0.7%), Chhattisgarh (-0.3%).
Tamil Nadu and West Bengal were excluded from the analysis as they have so far presented only interim budgets for 2026-27.