States' consolidated fiscal deficit has widened to 3.3 per cent of GDP in FY25 after remaining at 3 per cent for the three previous fiscals, the Reserve Bank said on Friday. The deficit exceeding 3 per cent mainly reflects 50-year interest free loans from the Centre under Special Assistance to States for Capital Investment, which is over and above the normal net borrowing ceiling of the States. In 2025-26, States have budgeted a gross fiscal deficit of 3.3 per cent of GDP, the central bank noted. The thrust on capital expenditure was sustained as capital expenditure remained steady at 2.7 per cent of GDP in 2023-24 and 2024-25 and is budgeted at 3.2 per cent of GDP in 2025-26. The consolidated outstanding liabilities of States remained elevated in the post-pandemic period with a budget estimate of 29.2 per cent of GDP at end-March 2026, RBI said.

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