Beyond the 3 Percent Fiscal Deficit Rule: What India’s States Reveal About Fiscal Discipline Vincent BelingaRangeet GhoshTanvir Malik May 11, 2026 This page in: English © 2026 The World Bank Group,

https://blogs.worldbank.org/en/endpovertyinsouthasia/beyond-the-3-percent-fiscal-deficit-rule--what-india-s-states-re India’s states began adopting Fiscal Responsibility Laws (FRLs) in the mid 2000s to rein in deficits, put debt on a sustainable path, and restore fiscal credibility after years of rising imbalances. Numerical rules, especially the 3 percent of Gross State Domestic Product (GSDP) fiscal deficit ceiling became the North Star of India’s subnational fiscal framework. While economic growth was strong and broad-based, numerical fiscal rules delivered on their objective. By the early 2010s, India’s subnational finances looked markedly more disciplined than they had just a decade earlier. Yet almost 20 years later, some states still carry high, and in some cases rising, debt levels (Figure XX) despite operating under the same fiscal rules. © 2026 The World Bank Group,