Why are Indian states going bankrupt?

We already covered how Sri Lanka is facing one of its biggest economic catastrophes.

 

And now, it feels that Indian states are also hopping on the bandwagon.

 

Buckle up, we have a story for you!

 


Once upon a time back in the early 2000s, an observation was made. This observation stated that the country’s 60% of the GDP was constructed by the salaries and pensions of the employees in the country.

 

Now obviously, it isn’t exactly one of the ideal situations, right? So, the central government set up a provident fund that allowed salaried employees and employers to finance their own pensions.

 

Again, not a favorable decision exactly, but at least this is what seemed necessary, except for Rajasthan however which still resorted to its old ways.

 

Now a state as big as Rajasthan was enough to convince the other states to follow the same trajectory and re-introduce the old and infamous pension schemes. This started leading to huge losses, the government running electricity at the water at huge losses too.

 

And since the government has to pay out of its own pocket to provide basic necessities like water and electricity, it only makes sense that the state governments started seeing a catastrophic loss in almost every sector.

 

Because of this, most states in the country right now are becoming their own version of Sri Lanka of some kind and it’s not allowing the country to head in the right direction, at least financially.

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