Mumbai: In a strong message to state governments, Reserve Bank of India (RBI) Governor Sanjay Malhotra today emphasized the need for fiscal discipline and prudent borrowing strategies at the 35th Conference of State Finance Secretaries held in Mumbai.
Addressing Finance Secretaries from 28 states and two Union Territories, along with senior officials from the Ministry of Finance, the Controller General of Accounts, and the Comptroller and Auditor General of India, Governor Malhotra stressed that maintaining fiscal discipline is critical for sustained economic growth. He urged states to focus on improving the quality of public expenditure and exercise caution on off-budget borrowings, which can pose fiscal risks.
A key highlight of the conference was the RBI’s recommendation that states spread their borrowings across different maturities, instead of concentrating on long-term bonds. This strategy, officials said, would improve market liquidity, reduce pressure on banks approaching investment limits, and enhance investor confidence. With states planning record borrowings in the current fiscal year, the guidance is seen as a measure to stabilize bond yields and market dynamics.
Governor Malhotra also underscored the importance of stronger coordination between states and the RBI on initiatives such as currency management, financial inclusion, and the Unified Lending Interface. Discussions during the conference included best practices in cash management, market borrowings, and fiscal consolidation, aiming to make state-level fiscal management more efficient and effective.
The conference, themed “Journey towards Economic Prosperity through the Path of Fiscal Consolidation,” reinforced collaborative efforts between the central and state governments to ensure fiscal prudence while promoting sustainable economic growth.
