New Delhi, Aug. 11 -- Indian states will need to focus on sustainable spending, stronger revenue mobilisation and a revival in capital expenditure to contain fiscal pressures, as elevated deficits and rising dependence on market borrowings continue to weigh on their finances, according to a Crisil report.

The report said the fiscal challenge for states is likely to intensify as they balance development priorities with fiscal prudence. With revenue growth remaining uneven, states will need to improve the quality of expenditure rather than simply increase spending, particularly as their debt levels remain elevated.

An analysis of 17 major states showed that their aggregate fiscal deficit remained high at 3.2 per cent of Gross State Domest...