A new NITI Aayog report warns that West Bengal’s rising liabilities, stagnant revenue mobilisation, and limited industrial base threaten its long-term fiscal health, prompting calls for urgent reforms and better debt management.
West Bengal’s finances are under heavy strain, with a working paper prepared by the National Council of Applied Economic Research for Niti Aayog warning that the state must rein in rising liabilities if it wants to restore long-term fiscal stability. The study says outstanding debt is approaching 40% of gross state domestic product in fiscal 2024-25, far above the average for all states, and argues that the state needs tighter discipline on borrowing and spending. It also says interest payments are taking up a growing share of revenue, leaving less room for public investment. The Print reported that the paper was released this month.
The report, titled “The Fiscal Landscape of West Bengal: Performance, Challenges and a Roadmap for Consolidation,” examines the state’s finances over the decade through fiscal 2024-25 and compares them with the national average and with Odisha. It says West Bengal’s fiscal deficit reached 4% of GSDP in 2024-25, while the revenue deficit stood at 2.4%. Interest payments absorbed an average 21% of revenue receipts over the period, compared with 12.8% for all states and 4.8% for Odisha, according to the paper cited by The Print.
A major weakness, the paper says, is revenue mobilisation. West Bengal has generated only about 35% of total spending from its own revenues during the period studied, making it more reliant on central transfers than most states. The report says transfers from the Centre accounted for an average 56.2% of the state’s revenue receipts, above the all-state average of 45% and Odisha’s 48.5%. It adds that the state’s own tax revenues have stayed broadly stagnant as a share of GSDP.
The paper links that weakness in part to the structure of the economy. Industry makes up about 22% of gross state value added, below the all-state average of roughly 29%, while services account for about 57%, much of it in relatively informal activities. Because manufacturing and industrial activity generally generate more tax revenue than many service-sector activities, the report says West Bengal’s smaller industrial base limits its fiscal capacity. It also notes that the state remains among the lower-income states, which narrows the tax base further.
The spending pattern is equally constraining. Between fiscal 2015-16 and 2024-25, current expenditure accounted for 86.4% to 92.1% of total spending, leaving little for capital outlay, which averaged just 1.6% of GSDP. The paper says that is well below the average for all states and Odisha. It also says subsidies consumed 7% of total expenditure in 2024-25, more than double Odisha’s share. To improve the outlook, the authors recommend stronger tax collection, better debt management, higher capital investment and a medium-term fiscal strategy tied to outcomes.
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