The gross fiscal deficit of the states is expected to decline to 4.2 per cent of gross domestic product at Rs 1,16,175 crore (Rs 1,161.75 billion) in the year ended March 31, 2004, as compared to 4.7 per cent at Rs 1,16,636 crore (Rs 1,166.36 billion) recorded in the previous fiscal.

The net fiscal deficit, as per the budgeted estimates in FY-04, is expected to be at 3.8 per cent amounting to Rs 1,04,043 crore (Rs 1,040.43 billion) from 4.2 per cent translating to Rs 102,805 crore (Rs 1028.05 billion) in the previous year, Reserve Bank of India said in the "State Finances: A Study of Budgets of 2003-04" released in Mumbai on Monday.

The revenue deficit at Rs 48,326 crore (Rs 483.26 billion), would be at 1.8 per cent of the GDP (Rs 61,240 crore - 2.5 pc in FY-03).

"The financing pattern of GFD indicates that the small savings receipts would continue to contribute a major share in FY-04. As per the budget estimates of FY-04, the share of small savings receipts, loans from banks and financial institutions and state provident funds in financing the GFD would be higher," it said.

On the other hand, the share of market borrowings and loans from the Centre is financing the states' GFD is budgeted to decline in 2003-04, the central bank added.

The Budget estimates for FY-04 have envisaged a growth rate of 13.7 per cent in states' revenue receipts. This rise is expected mainly due to higher growth rates in states' own revenue receipts. This trend would be helpful in the process of fiscal consolidation, it said.

RBI said the estimated total tax revenue in FY-04 is pegged at Rs 2,29,313.1 crore (Rs 2,293.13 billion), out of which contribution of the states' own taxes is at Rs 1,66,327.1 crore (Rs 1,663.27 billion) and that of central taxes is Rs 62,986 crore (Rs 629.86 billion).

States' own taxes would form 6.1 per cent of GDP in 2003-04, compared with 5.9 per cent in previous fiscal.

Tax receipts would account for nearly 69 per cent of total revenue receipts, while non-tax receipts would account for the rest, it added.