The recent report of the Reserve Bank of India (RBI) on state finances shows a significant hike in their budgetary spending. It is a major increase as state budgets substantially impact social sector spending and the overall development of the economy. Another reason the states' fiscal policies are crucial is that the aggregate expenditure in the state budgets is generally more comprehensive than the union budget. But, over the past few years, the few state spending has gone up dramatically, and it caused the states to get heavy loans to cover those spending as the revenues could not see a substantial rise.
In the past few years, the COVID - 19 pandemic pushed the union government to initially increase its budgetary expenditure above the planned fiscal spending for the states. Still, the state budgets have regained their pre-eminent role since then.