Fiscal stress deepens across states as all 28 post deficits in FY25: CAG report
New Delhi, June 16
India's states continued to face mounting fiscal pressures in 2024-25, with all 28 states reporting fiscal deficits and their combined liabilities rising to Rs 90.51 lakh crore as of March 31, 2025, according to the Comptroller and Auditor General's report State Finances 2024-25 released on Monday.
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
Reader Comments
It's good to see states are relying more on their own tax revenues, but the decline in central assistance is worrying. State GST now accounts for 43% of own tax revenues - that's a positive outcome of the GST regime. But with committed expenditure eating up 43% of revenue expenditure, where's the money for development? 🤔
The CAG report is a reality check. States like Nagaland spending 74% of revenue expenditure on committed items is unsustainable. We need to rationalize subsidies (10% of revenue expenditure) and focus more on capital expenditure for growth. The economic sector getting 63% of capital outlay is good, but we need more efficiency.
Interesting data. Revenue expenditure at 80% of total spending leaves little room for infrastructure investment. The fact that some revenue-surplus states still needed Ways and Means Advances shows cash management issues. India's federal fiscal dynamics need a serious overhaul post-GST.
The positive takeaway is that states' own tax revenue has more than doubled since 2015-16. But the flip side is the growing reliance on debt. Rs 90.51 lakh crore in liabilities is a huge burden. We need to ensure this borrowing is channeled into productive assets, not just running expenses. Fiscal federalism needs strengthening.
Education being the largest expenditure head is good news, but we need to see outcomes. The report highlights that committed expenditure like salaries and pensions are eating up funds. States need to improve tax compliance and expand the tax base rather than just hiking rates. Overall, a wake-up call
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