Per Capita Income and State Debt: Uneven Fiscal Capacity in India

state level gdp nsdp

TL;DR: High-income states like Delhi, Karnataka, Tamil Nadu, Gujarat, and Maharashtra keep debt low and stable relative to GSDP, while many lower-income states in central, eastern, and North-Eastern India carry higher debt. Steady growth helps states like Odisha and Gujarat reduce debt, but most states saw debt rise after 2020. The pattern shows that higher per capita income generally goes hand-in-hand with better debt management.

Context
When we talk about India’s economy, we often hear numbers about national growth and GDP. But given how large and diverse our country is, and how different states are at very different stages of development, these numbers often conceal the variation in income levels and development outcomes across states. To understand India’s real economic picture, we need to look closely at how individual states are performing.

This article uses the Reserve Bank of India’s latest Handbook of Statistics on Indian States to study the financial performance and growth in different states.

Who compiles this data?
The Handbook of Statistics on Indian States, published annually by the Reserve Bank of India (RBI), serves as a comprehensive repository of state-level socio-economic and financial data. While the RBI is the compiler and publisher, the data itself is sourced from multiple official agencies, including:

Where can I download clean & structured data related to the Handbook of Statistics on Indian States?
Clean, structured, and ready-to-use datasets on various data points that are published in the Handbook of Statistics on Indian States can be downloaded from Dataful.

Key Insights

Delhi on top; Karnataka, Telangana and Tamil Nadu show strong growth in Per Capita NSDP
Indian states differ widely in how much income they generate and how fast they grow. Data on per capita NSDP at constant prices shows that Delhi remains at the top, with income per person at around ₹2.83 lakh, helped by its strong services and urban economy. At the same time, Karnataka, Telangana, and Tamil Nadu have seen faster growth over the past decade, driven by manufacturing, IT services, and steady investment. In contrast, many states in central and eastern India continue to have lower income levels, as their economies depend more on agriculture and have less industrial activity. While these states are also growing, their progress has been slower compared to the better-performing regions.

High-Income states manage debt better, while Low-Income ones carry higher burden
Two states may have similar overall income levels, but one may have better banking penetration, more credit, and stronger public finances. Some states can raise more funds and spend more on development, while others depend heavily on support from the central government.

A clear pattern emerges when we compare the per capita income levels with the outstanding liabilities as a percentage of GSDP. States with higher per capita income, such as Delhi, Karnataka, Tamil Nadu, Gujarat, and Maharashtra, generally have lower or more stable debt ratios. This suggests that stronger income levels and broader economic bases help these states manage borrowing better. For example, Delhi has one of the lowest debt-to-GSDP ratios, reflecting both high income per person and limited borrowing needs.

In contrast, many states with lower per capita income, especially in eastern, central, and North-Eastern India, show much higher debt ratios. States such as Arunachal Pradesh, Mizoram, Manipur, Nagaland, and Bihar have debt levels that are high relative to their economic size. This is partly because these states have smaller economies, depend more on central support, and have limited capacity to raise their own revenue. Even moderate borrowing appears large when compared to their GSDP.

This is crucial because states with higher income and lower debt can spend more on health, education, infrastructure, and social programs, supporting long-term growth. In contrast, states with lower income and high debt have less room to invest, making it harder to improve living standards and catch up with richer states.

Why does it matter?
These statistics are important because they help everyone understand how different states in India are performing and guide key decisions. They help identify which states are growing faster, which are lagging behind, and where resources and investment can have the most impact. Fiscal indicators such as debt and deficit reveal whether a state’s growth is sustainable and whether public finances are being managed effectively.

Key Numbers