The gross fiscal deficit of the states rose from an average of 20.3 per cent of state spending in 1990-99 to a budgeted 30.8 per cent in the current year, and the actual outcome could well be worse. Maharashtra s lack of money to pay its dues to Enron shows that the rot has spread even to states once thought to be in relatively good shape. In New Delhi, periodic crises have energised the government to pull up its socks and overcome the problem. But in Bihar, fiscal crises have led to a collapse of administration, and non-payment of even pensions and salaries. The future of India depends on the answer.
Corruption is bad enough in solvent states.
But when state governments cannot pay employees, the latter turn into open predators for sheer survival. And once administrators have turned predators, restoring normal decency and accountability is very difficult, as has been proved by many regimes in Africa. So it is a matter of utmost urgency for state governments to improve collection of revenue and user charges, and reduce spending. Many complain that they have been bankrupted by the Pay Commission award. Instead they too implemented the same wage hike like lemmings, and are now over the edge.