India Caps State Governments' Deficit to Curb Reckless Spending
- States to curtail deficit to 3% of gross domestic product
- Can widen to 3.5% if interest payments, debt levels in check
Shoppers look at a length of fabric at a market in Leh, Jammu and Kashmir, India, on Wednesday, Aug. 5, 2015. India is scheduled to release second-quarter gross domestic product figures on Aug. 31.
Photographer: Prashanth Vishwanathan/BloombergThis article is for subscribers only.
Indian Prime Minister Narendra Modi’s administration approved a proposal to cap states’ budget deficits as it looks to shrink Asia’s widest shortfall.
State governments will have to limit the gap to 3 percent of their gross domestic product in a financial year, Frank Noronha, the federal government’s spokesman, wrote on Twitter. The state governments can exceed the target by 0.5 percentage point if they keep interest payments and the debt-GDP ratio within specified limits.