Mumbai, Jan. 24 -- States' consolidated gross fiscal deficit increased to 3.3 per cent of gross domestic product (GDP) in 2024-25, after remaining below 3.0 per cent during the previous three consecutive years, Reserve Bank's annual publication "State Finances: A Study of Budgets" noted.

The deficit of States exceeding 3 per cent mainly reflects 50-year interest-free loans from the Centre under the Special Assistance to States for Capital Investment, which is over and above the States' normal net borrowing ceiling.

For 2025-26, States have budgeted gross fiscal deficit at 3.3 per cent of GDP while improving the composition of spending by restraining revenue expenditure.

The RBI report noted that the consolidated outstanding liabilities...