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RBI advises states to be more prudent in managing finances
The Reserve Bank of India commends states for fiscal deficit reduction but urges adherence to the 'golden rule' of financing current expenditure with current revenue. The RBI also criticizes excessive subsidies and cash transfers, advocating for rationalization and outcome-based budgeting for better resource allocation and developmental impact.
A Reserve Bank of India study of state finances has given a thumbs up to the states for containing the consolidated fiscal deficit, but at the same time also nudged them to move to the 'golden rule' of funding current expenditure from current revenues, and use borrowed funds for capital expenditure.
The central bank has also come heavily on excessive subsidies and cash transfers to farmers, youth and women.
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