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State Finances Under Stress: Revenue Surplus States Halve Since 2019

The Economic Survey reveals a sharp decline in the number of Indian states with a revenue surplus, dropping from 19 in FY19 to just 11 in FY25. This broad-based deterioration has pushed the collective revenue deficit of states to 0.7% of GDP, a significant increase from 0.1% in FY19. The stress intensified recently, with the revenue deficit rising by 40 basis points between FY24 and FY25, driven by lagging revenue growth and higher expenditure commitments. While states' own tax revenues have grown post-pandemic, the momentum is moderating, underscoring the need for careful fiscal management.

Key Points: State Revenue Surplus Declines, Fiscal Stress Rises: Eco Survey

  • 18 states saw revenue balance worsen
  • Collective revenue deficit hits 0.7% of GDP
  • Revenue growth lags behind nominal GDP
  • States' own tax revenue share rises to 50%
  • Fiscal stress intensified in FY24-FY25
3 min read

Eco survey raises concern of States fiscal situation, revenue surplus states decline from 19 in FY19 to 11 in FY25

Economic Survey reveals only 11 states in revenue surplus for FY25, down from 19 in FY19, highlighting growing fiscal pressure and deficit concerns.

"states in revenue surplus reduced from 19 in FY19 to 11 in FY25(PA) - Economic Survey"

New Delhi, January 29

The number of Indian states reporting a revenue surplus has declined sharply over the years, falling from 19 in FY19 to just 11 in FY25, highlighting rising fiscal stress at the state level, according to the Economic Survey.

The Survey noted that between FY19 and FY25PA, as many as 18 states witnessed a deterioration in their revenue balances. Of these, 10 states slipped into a revenue deficit from a revenue surplus position, while five states saw a further worsening of their existing revenue deficits.

Three states, though still in revenue surplus, also recorded a deterioration in their fiscal position during this period.

It stated "states in revenue surplus reduced from 19 in FY19 to 11 in FY25(PA), leading to an overall increase in revenue deficit of states as a collective".

As a result of this broad-based deterioration, the collective revenue deficit of states increased significantly to 0.7 per cent of GDP in FY25PA, compared to just 0.1 per cent of GDP in FY19.

The Economic Survey pointed out that this reflects growing pressure on state finances over the past few years.

The stress intensified further in the recent period. Between FY24 and FY25PA, the revenue deficit across all states increased by 40 basis points. The Survey identified lagging revenue growth relative to nominal GDP growth as a key factor behind this renewed fiscal stress.

This was compounded by higher expenditure commitments, including discretionary unconditional cash transfers undertaken by several states.

Despite these challenges, states continue to rely heavily on their own tax revenues. The Economic Survey highlighted that states' own tax sources registered a compound annual growth rate (CAGR) of 12.6 per cent in the post-pandemic period.

As a result, the share of states' owns tax revenue in total revenue receipts increased from 46 per cent in FY22 to around 50 per cent in FY25 (PA).

The second-largest source of revenue for states remained their share in central taxes, which accounted for around 32 per cent of total revenue receipts. This was followed by grants-in-aid from the Centre and non-tax revenues.

However, the momentum in revenue collection appears to be moderating in the current fiscal year. As per the Economic Survey, during the first eight months of the ongoing financial year (as on end-November 2025), the combined revenue receipts of states grew at a rate of 6.6 per cent.

This growth was lower compared to the year-on-year growth recorded during the same period in the previous year.

The Survey's findings highlight the need for careful fiscal management by states, especially in the context of slowing revenue growth and rising expenditure pressures, as maintaining revenue balance remains crucial for long-term fiscal sustainability.

- ANI

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Reader Comments

P
Priya S
The mention of "discretionary unconditional cash transfers" by states is key. While popular, these schemes put immense pressure on finances without building productive assets. We need a balance between welfare and fiscal prudence. Long-term sustainability is more important than short-term populism. 🤔
A
Arjun K
Good that states' own tax revenue is growing at a decent CAGR. Shows some fiscal maturity. But the slowdown this year is concerning. Maybe time for states to look beyond property and fuel taxes? Need to broaden the tax base efficiently.
S
Sarah B
As someone who works in the development sector, I see this first-hand. Grants for health and education projects are getting delayed or reduced because states are scrambling to manage their deficits. This directly affects the quality of services in rural areas.
V
Vikram M
Post-pandemic recovery has been uneven. Some states invested heavily in public health and support, which was necessary but costly. The Centre's share of taxes (32%) seems stable, but are the devolution formulas still fair for all states? Southern states often feel they contribute more than they get back.
K
Karthik V
Fiscal responsibility is a two-way street. While states must manage expenses, the Centre must ensure timely release of funds and grants. Too much centralization of schemes also ties the hands of states. Need more cooperative federalism in practice, not just in speeches.

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