West Bengal's Fiscal Tightrope: Debt, DA Hike, and SC Dues Challenge Mamata Govt's Promises
In a bold move amidst severe financial constraints, the Trinamool Congress-led government in West Bengal presented an interim budget on Thursday, expanding flagship social welfare programs while grappling with a staggering debt burden exceeding Rs 8 lakh crore. The budget, tabled by State Finance Minister Chandrima Bhattacharya, includes a 4% hike in dearness allowance (DA) for government employees, adding an estimated Rs 750 crore to the state's expenditure.
Supreme Court Directive Adds Pressure
Compounding the fiscal strain, the Supreme Court has directed the West Bengal government to pay 25% of pending dues from 2008 to 2019, amounting to approximately Rs 10,400 crore, by March 31. This directive comes as the state's revenue deficit for 2026-27 is projected at Rs 21,759 crore, a decline from previous years but still significant. Revenue deficits have been persistently high, with figures rising from Rs 39,727 crore in 2024-25 to Rs 41,164 crore in 2025-26, and the SC order could push the 2026-27 deficit to nearly Rs 32,000 crore.
Expanding Welfare Schemes Amid Rising Debt
The interim budget allocates substantial funds to key social initiatives. Rs 40,000 crore has been earmarked for the Lakshmir Bhandar scheme, which will increase monthly grants to women from poor households by Rs 500. Another Rs 40,000 crore is set aside for the Banglar Bari scheme, aimed at providing housing for impoverished families. Over the first 50 months, Lakshmir Bhandar has already disbursed Rs 74,000 crore to 2.2 crore women, while Banglar Bari has facilitated the construction of one crore homes, with plans for an additional 32 lakh houses in the next two months.
However, the state's outstanding debt continues to climb alarmingly. From Rs 6.99 lakh crore in 2024-25, it rose to Rs 7.62 lakh crore in 2025-26 and is estimated to reach Rs 8.15 lakh crore in 2026-27. According to the 16th Finance Commission report, West Bengal's debt-to-GDP ratio stands at 38.3%, making it one of India's most indebted states, second only to Punjab.
Revenue Sources and Expert Opinions
The state's revenue receipts are projected to increase from Rs 2.45 lakh crore in 2025-26 to Rs 2.88 lakh crore in 2026-27. Key revenue streams include State Goods and Services Tax (SGST) at Rs 56,279 crore, state excise taxes at Rs 24,200 crore, and sales taxes at Rs 13,976 crore. Additionally, the state's share of central taxes amounts to Rs 1.09 lakh crore.
Despite these figures, experts express skepticism about the government's ability to sustain its expenditures. Economist Saikat Sinha Roy, former head of the Economics Department at Jadavpur University, warns that the combined pressures of welfare allocations, DA hikes, and SC dues will exacerbate the fiscal burden. "The debt burden of the state, which is alarmingly high, is going to increase further. This is worrisome in the context of stagnant central transfers and lack of new revenue avenues," Roy stated, referencing the Fiscal Responsibility and Budget Management Act, 2003.
In contrast, Amit Mitra, Principal Chief Adviser to the Chief Minister and former finance minister, maintains optimism, highlighting a reduction in the revenue deficit from 3.75% to 1.01% of state GDP since Mamata Banerjee took office. "Our destination is towards zero – the art of the possible, step by step," Mitra asserted.
As West Bengal navigates this complex fiscal landscape, the interim budget's promises face rigorous scrutiny, with the state's capacity to balance welfare commitments against mounting debts and legal obligations remaining a critical concern.
