Fiscal profligacy by poll-bound states needs to be closely watched: UBS

Fiscal profligacy by poll-bound states needs to be watched closely, as higher spending on welfare measures will impact capital expenditure over the coming years, a Swiss brokerage said on Friday.

A total of 11 states have gone to polls or are likely to have elections soon, the report by UBS Securities said, adding that four of them -- Maharashtra, Madhya Pradesh, Rajasthan and Odisha -- have increased their fiscal deficit targets.

"The recent fiscal profligacy seen in poll-bound states should be watched closely," the report said.

In the last few years, states managed to control their fiscal deficit under the 3 per cent level proposed by the Fifteenth Finance Commission, the report said, acknowledging that the Centre has also been bringing down the fiscal deficit.

The poll-bound states are increasing their welfare spending and stimulus, which has led to a widening in their aggregate FY25 fiscal deficit estimates by 0.20 per cent in the budgets presented in June or July, it said.

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