Fiscal stress deepens across states as all 28 post deficits in FY25: CAG report

Presenting the key findings of the report, Shefali Srivastava Andaleeb, Director General (GA-I), CAG, highlighted the widespread fiscal strain across states.

"In the financial year 2024-25, all the 28 States were in fiscal deficit, of which 15 States had fiscal deficits above 3 per cent of Gross State Domestic Product (GSDP). We have analysed these fiscal responsibility indicators state-wise in the publication," Andaleeb said.

The report, released by Comptroller and Auditor General of India K Sanjay Murthy, provides a decade-long assessment of state finances from 2015-16 to 2024-25 based on audited annual accounts.

Murthy expressed hope that the report would serve as an evidence-based resource for governments, policymakers, researchers and citizens, contributing to greater fiscal transparency, accountability and sustainability across states.

The report underlined the growing fiscal burden on states despite improvements in revenue mobilisation. Combined budgetary expenditure of all states stood at Rs 51.20 lakh crore in 2024-25, while revenue expenditure continued to account for nearly 80 per cent of total spending.

A significant portion of state expenditure remained tied up in committed liabilities such as salaries, pensions and interest payments. According to the report, committed expenditure exceeded 43 per cent of the combined revenue expenditure of the 28 states, with sharp variations among states, ranging from 74 per cent in Nagaland to 29 per cent in Maharashtra.

Andaleeb said, "Committed expenditure, subsidies and grants-in-aid salary expenditure together accounted for more than 61 per cent of revenue expenditure. Subsidies alone accounted for over 10 per cent of revenue expenditure in 2024-25."

The report also flagged cash-flow challenges in several states. While 15 states recorded revenue surpluses and 13 remained in revenue deficit during 2024-25, some revenue-surplus states still resorted to Ways and Means Advances (WMA), indicating liquidity and cash-management pressures despite positive revenue balances, Andaleeb noted.

On the revenue front, states increasingly relied on their own resources. States' own tax revenue (SOTR) accounted for nearly 50 per cent of the combined revenue receipts of Rs 40.52 lakh crore in 2024-25, with State GST contributing more than 43 per cent of total own tax revenues.

The report showed that states' own tax revenue more than doubled from around Rs 8.40 lakh crore in 2015-16 to Rs 20.31 lakh crore in 2024-25. It also noted improved average annual growth in tax collections during the post-GST period compared with the pre-GST era.

At the same time, the share of Grants-in-Aid and Central assistance in total state revenues declined over the decade, reflecting greater dependence on states' own revenue mobilisation efforts.

According to the report, expenditure across social, economic and general sectors remained broadly balanced, while the economic sector accounted for 63 per cent of total capital outlay, reflecting a continued focus on infrastructure development. Education remained the largest expenditure head among major functional sectors, followed by social welfare and energy. (ANI)