Fiscal fetishism and the warped narratives on state finances

The demonization of states is driven by a desire to hide the danger lurking in the central government’s finances.

I am a man more sinned against than sinning.

(King Lear, Act 3, Scene 2)

If you have been following mainstream media over the past few weeks, you would not have missed the carpet bombing against states on their financial situation. It all began in June, when the Reserve Bank of India’s RBI Bulletin carried an empirical analysis highlighting the “fiscal risks” faced by some states. The analysis was eminently worthy of a reasoned discussion. But soon after its publication, several motivated press reports began to appear. These reports used—and misused—figures from the paper to build doomsday scenarios.

Following this, …