Why in news?

White Papers recently released by Kerala and Tamil Nadu — two of India's most socially and economically advanced States — described their outstanding debt as alarming.

This has revived a debate about State finances. State debt is often unfairly dismissed as fiscal mismanagement, when it may instead reflect a mismatch between development aspirations and the limited fiscal capacity of States.

What’s in Today’s Article?

• The Core Fiscal Dilemma
• How States Fund Themselves — and Fall Short?
• Kerala's Spending: Locked Into Day-to-Day Costs
• The Investment Trap
• The China Comparison: A Different Model
• Rethinking State Debt

The Core Fiscal Dilemma

• The heart of the problem lies in a structural imbalance in Indian federalism. Debt builds up over years through deficits — when a government's spending exceeds its tax and other receipts.
• The key mismatch is this: the power to raise taxes rests largely with the Union government, but a larger share of overall public spending is borne by the States.
• Most State expenditure goes to areas that directly touch people's lives:
  • Social sectors — health and education
  • Economic sectors — agriculture and irrigation
• In Kerala, high social-sector spending since the 1960s has been central to its social progress. Comparative per-capita social expenditure (2020–23) shows the divide clearly:
  • 

How States Fund Themselves — and Fall Short

• States meet expenditure through two main channels:
  • Own revenues — mainly State GST (SGST) and sales tax.
  • Union transfers — devolution, grants, and loans.
• Kerala's case illustrates the squeeze. It has a good record of raising own-tax revenue — 1.5 times the all-India per-capita average.
• Yet its share in Union tax devolution was just 1.92%, lower than its 2.6% share of India's population in 2023–24.
• In effect, a State that taxes itself well still receives proportionally less from the centre. The gap between expenditure and receipts is bridged through market borrowings, on which States pay interest.

Kerala's Spending: Locked Into Day-to-Day Costs

• A closer look at Kerala's budget reveals why fiscal space is so tight. Of its limited resources, only about 10% goes to capital expenditure (which builds future productive capacity).
• The rest is revenue (day-to-day) expenditure:
  • ~20% on salaries (mainly teachers, nurses, doctors, police)
  • 15.3% on pensions
  • 16.5% on interest on market borrowings
• With such a large share pre-committed to salaries, pensions, and interest, very little is left to invest in the future.

The Investment Trap

• This traps Kerala in a genuine dilemma:
  • If it cuts revenue expenditure (pensions, employees) to free up money, it risks eroding its hard-won social-sector strengths.
  • But it urgently needs large investments in infrastructure, higher education and research, and public transport to compete in modern, knowledge-intensive sectors.
• The human cost is visible: educated young people are leaving Kerala in large numbers because the State cannot create opportunities matching their aspirations.
• There is also a striking paradox — the government's weak fiscal capacity contrasts with visible private affluence (large houses, expensive cars, dense gold shops), threatening to widen inequality.

The China Comparison: A Different Model

• Analysts contrast India's constraints with China's model of decentralised investment-led growth:
  • In China, provinces and local governments undertake the bulk of growth-boosting investment, borrowing heavily against the country's large domestic savings pool.
  • Their efforts are coordinated through central government planning.
  • They raise resources via local government bonds (LGBs), land sales, and off-budget borrowing through local government financing vehicles (LGFVs), on top of central transfers.
• The cost difference is stark. Chinese local governments borrow from their banking system at roughly 2%, whereas Indian States pay far more.
  • State Development Loans (SDLs) — the securities States issue to borrow from the market — carry interest of about 6.5% to 7.5%.
  • This is 0.25 to 0.75 percentage points higher than the rate at which the Union government itself borrows, and significantly more expensive than the cost Chinese local governments face.
• In other words, Indian States are squeezed twice over: they face both limits on how much they can borrow and a markedly higher cost of debt, which further tightens the noose around their finances.

Rethinking State Debt

• In India, government bonds are mostly bought by domestic institutions like banks and insurance companies. These institutions use the savings that ordinary people deposit with them. So when the government borrows, it is really borrowing from its own citizens.
• Hence, a government that borrows to expand welfare and create opportunities is doing something far more useful than one that refuses to spend at all.
• Against this backdrop, India needs a system that allows State governments to use the country's own savings more easily and at a lower cost, so they can fund well-planned development projects.

About Himayat Sagar Lake:

• It is an artificial lake in Telangana.
• It was built on the Esi River (a tributary of the Musi River) during the rule of the last Nizam of Hyderabad.
• The main objective was to provide drinking water and, at the same time, save the city from floods.
• The construction of the lake was completed in 1927 and was named after Himayat Ali Khan, the son of the last Nizam of Hyderabad.
• It lies parallel to Osman Sagar Lake.
• The Himayat Sagar and Osman Sagar reservoirs provide water supply to the twin cities of Hyderabad and Secunderabad. 

About Aldabra Giant Tortoise:

• It is the second-largest species of land tortoise in the world, after the Galapagos giant tortoise (Chelonoidis nigra).
• Scientific Name: Geochelone gigantea
• Habitat and Distribution:
  • It is endemic to the Aldabra Atoll of the Seychelles, an archipelago nation in the western Indian Ocean.
  • It  is terrestrial and occurs in a wide variety of habitats, including scrub forests, mangrove swamps, and coastal dunes and beaches, each with their respective vegetation.
  • The largest populations of tortoises are found on grasslands called “platins.”
  • Their heavy grazing has formed a special kind of grassland habitat called “tortoise turf.”
• Features:
  • Males are considerably larger than females and have longer, thicker tails.
  • Their carapace (or upper shell) is highly domed and thick, with a small neck plate that is usually visible, a feature absent in other species of giant tortoises.
  • Lifespan: It is among the longest-living vertebrates, with many individuals living over 100 years and some believed to exceed 150 years.
  • Conservation Status:
  • IUCN Red List: Vulnerable.

About K9 Vajra-T:

• It is a 155 mm, 52-caliber tracked self-propelled artillery system (howitzer).
• It is an Indian adaptation of South Korea's K9 Thunder 155 mm self-propelled howitzer.
• It is built by Larsen & Toubro with technology transferred from South Korean defence major Hanwha Defense based on its K9 Thunder.
• It is customised to suit the requirements of the Indian Army for operations in varied terrains, including deserts, plains, and high-altitude regions.
• Features:
  • It has all-welded steel armour up to 19 mm thick.
  • It is powered by an MTU MT 881 Ka-500 diesel engine producing 1,000 horsepower.
  • The main weapon is the 155mm /52 calibre gun capable of firing high-explosive, smoke, and guided projectiles.
  • It has a burst rate of fire of three rounds per 15 seconds and a maximum rate of fire of six to eight rounds per minute for three minutes.
  • It can strike enemy targets at around 50 kilometres.
  • It can also turn around at zero radius, basically at the same place where it is standing.
  • The K9 uses a digital fire control system by which it can fire multiple rounds that can impact a given area at the same time (this mode of operation is called Multiple Round Simultaneous Impact, or MRSI).

About National Investment and Infrastructure Fund (NIIF):

• It is a fund created by the Government of India for enhancing infrastructure financing in the country.
• It is India’s first-ever sovereign wealth fund (SWF).
• NIIF got registered with SEBI as Category II Alternative Investment Fund (AIF) in 2015.
• It is a collaborative investment platform for international and Indian investors with a mandate to invest equity capital in domestic infrastructure.
• NIIF invests across asset classes such as infrastructure, private equity, and other diversified sectors in India, with the objective of generating attractive risk-adjusted returns for its investors.
• It invests in greenfield (new), brownfield (existing), and stalled projects.
• NIIF is 49% owned by the Indian government and has more than $5 billion in assets under management, making it the country’s biggest infrastructure fund.
• NIIF benefits from its association with the Government yet is independent in its investment decisions.
• It is professionally run and managed by National Investment and Infrastructure Fund Limited (NIIFL).
• Over the years, NIIF has attracted investments from leading global sovereign wealth funds, pension funds, multilateral development institutions, and domestic financial institutions.
• Currently, there are four funds under the NIIF Umbrella.
  • NIIF Master Fund: This fund primarily invests in infra-related projects such as roads, ports, airports, and power. It is the largest infrastructure fund in India.
  • NIIF Private Markets Fund: Invests in funds managed by third-party managers in infrastructure and associated sectors.
  • NIIF Strategic Opportunities Fund: It invests and develops large-scale businesses and greenfield projects that are of strategic importance to the country.
  • India-Japan Fund:
    • NIIF’s first bilateral fund invests in environment preservation in India.
    • It also seeks to enable opportunities for collaboration between Indian and Japanese companies in India.
    • The Fund has a target corpus of US$600 million, with the Government of India contributing 49% and the remaining 51% contributed by the Japan Bank for International Cooperation, a policy-based financial institution wholly owned by the Government of Japan.

About PM Family Care Tracker (PM-FCT):

• It is a digital platform aimed at strengthening maternal and child health, nutrition, and family welfare.
• The digital platform would ensure that pregnant women, mothers, and children receive all eligible government benefits through continuous monitoring and timely intervention.
• It has been designed to digitally monitor every stage of a child's development, from pregnancy through 18 years of age, while helping eligible families receive welfare benefits on time.
• The PM-FCT provides end-to-end monitoring of key health milestones, including antenatal and postnatal care, immunisation, nutrition, growth monitoring, school enrolment and attendance, and adolescent health services.
• The platform also features digital Health Passports for individuals and families, dashboards to facilitate delivery of government welfare schemes, and automated alerts for missed vaccinations and other essential health services.
• For example:
  • Alerts will be generated automatically if a child misses vaccination or drops out of school.
  • Notifications will reach local officials, legislators and Members of Parliament, enabling volunteers and government authorities to intervene promptly and ensure that every child receives essential services.
• It is expected to enable timely interventions, reduce maternal and infant mortality, address malnutrition, and minimise gaps in service delivery.
• PM-FCT is designed as a family-centric digital platform, rather than maintaining separate records for different schemes, allowing authorities to track the health and welfare status of every family member through a single interface.
• The initiative aims to improve convergence across multiple government departments by integrating data from birth and death registration systems, and health, nutrition and education databases.
• The pilot project will initially be implemented in Gandhinagar and, if successful, is proposed to be expanded across Gujarat and later replicated in other states.

About Samagra Shishu Bal Swasthya Karyakram:

• It is a unified national programme that provides a seamless continuum of home and community-based care for every child from birth to 36 months of age.
• The programme embodies the vision of Comprehensive care during the first three years.
• It integrates the existing Home-Based Newborn Care (HBNC) and Home-Based Care for Young Child (HBYC) programmes into a single comprehensive framework.
• Features of Samagra Shishu Bal Swasthya Karyakram:
  • Risk-stratified Approach: It introduces a risk-stratified approach, providing intensified follow-up for newborns and children identified as “at-risk”, due to conditions such as low birth weight, prematurity, delayed initiation of breastfeeding etc.
    • Under the programme, 'At-risk' newborns will receive up to nine home visits during the first 42 days of life, while 'At-risk' children will receive up to eight home visits up to the age of 36 months.
  • Community Platforms: It introduces Well-Baby Sessions at every Village Health, Sanitation and Nutrition Day (VHSND) and a monthly Shishu Shivir at Ayushman Arogya Mandirs.
  • Maternal Mental Health: It incorporates post-partum maternal mental health screening as an integral component of community-based care.
    • ASHAs will undertake early screening and facilitate timely referral for further assessment and support whenever necessary.
  • Early Childhood Development: It also mainstreams Nurturing Care for Early Childhood Development (ECD) by promoting responsive caregiving, early learning opportunities.
  • Technology & Digital Integration: It envisages use of digital technologies to enhance service delivery, monitoring and continuity of care.
    • Decision-Support Systems (DSS), child-wise digital tracking, referral mechanisms and alert systems will strengthen follow-up and case management of 'At-risk' newborns and children.
    • These digital systems will be integrated with the JANANI Portal, U-WIN Portal, MPCDSR Portal, RBSK 2.0 Portal and POSHAN Tracker, enabling seamless data exchange through ABHA and Baal-ABHA IDs.
  • Tailored Strategy: It includes tailored strategies to strengthen home-based care in urban areas, particularly for children residing in slums, migrant settlements and other underserved communities.

About Satkosia Tiger Reserve:

• Location: It is located in
• This reserve encompasses the Satkosia Gorge Sanctuary and Baisipalli Wildlife Sanctuary.
• River: The river Mahanadi flows through the valleys in the middle of the Reserve.
• The area is also a part of the Mahanadi Elephant Reserve.
• It is the meeting point of two biogeographic regions of India, the Deccan Peninsula and the Eastern Ghats.
• Terrain: The terrain is hilly with moderate to steep slopes and narrow valleys.
• Vegetation: The forest vegetation comprises North Indian tropical moist deciduous forests and Moist peninsular low-level sal.
• Flora:
  • The main tree species is sal, which grows in gregarious formations.
  • Other associate species are Asan (Terminalia alata), Dhaura (Anogeissus latifolia), Bamboo (Dendrocalamus strictus), and Simal (Bombax ceiba).
• Fauna:
  • The flagship species among the fauna include tiger, leopard, elephant, spotted deer, sambar, chowsingha, barking deer, bison, wild dog, sloth bear, jackal, giant squirrel, and porcupine.
  • It is the natural habitat of two endangered species, viz., the freshwater crocodile and the gharial.