SBI Report Highlights Persistent Fiscal Stress in West Bengal
West Bengal's fiscal position remains under pressure despite receiving a higher share of grants and tax devolution from the Central Government, according to a report by State Bank of India (SBI). The report noted that the state's fiscal health has not remained healthy due to rising debt accumulation over the years. It highlighted that grants from the Centre and tax devolution have consistently accounted for more than 50 per cent of West Bengal's overall tax revenue.
Factors Behind Fiscal Strain
According to SBI, the persistent fiscal stress is linked to several factors. The report stated, "This has happened owing to rising unconditional cash transfers, higher off-balance sheet borrowings and higher committed expenditure and higher leakages in terms of 'middleman intermediation' siphoning of monetary resources." As per the research report, the state's revenue deficit widened further from FY20 onwards, post-legal removal of revenue deficit targets under the 2020 FRBM Act.
FY27 Budget Signals Shift Towards Investment-Led Growth
Meanwhile, the FY27 Budget presented on 22 June 2026 signals a shift towards investment-led growth and fiscal consolidation, as per the report. It outlined a net budget allocation of Rs 4.38 lakh crore. At the same time, it highlighted that the revenue deficit had reduced to almost half to Rs 21,948 crore for FY27BE, which stood at Rs 39,727 crore in FY25. The report noted, "Budget is not narrowly consumption oriented, but it attempts to support household welfare while also investing in human capital, urban services, logistics and infrastructure."
Historical GSDP Growth Comparison
Highlighting historic data, the report noted that during the CPI(M) period, the state's nominal GSDP rose from Rs 6,423 crore to Rs 4.61 lakh crore, marking a 65.6-fold increase, compared with a 73.4-fold growth nationally. On the other hand, the TMC period saw GSDP increasing from Rs 5.2 lakh crore to Rs 19.9 lakh crore, a 3.8-fold rise, however below India's 4.1-fold growth.
Non-Tax Revenue and Legal Disputes
As per the report, the state has the potential for higher non-tax revenue; however, it remains locked in legal disputes, which creates a massive fiscal drag and is unable to garner non-tax revenues, which remain at 3% of revenue receipts. It further stressed that a high proportion of the budget allocated for committed expenditures limits the state's flexibility to allocate funds towards other developmental priorities and capital infrastructure.
Green Transition Risk
Apart from this, the state's non-tax revenues are linked to coal mining, a mineral that will be slowly phased out, which exposes the state's finances to the risk of green transition, as per the report.
