State Finances 2024-25 Report, Fiscal Deficit, Revenue Balance

The CAG’s State Finances Report 2024-25 highlights a significant structural shift in the expenditure pattern of Indian states, marked by a sharp rise in subsidy-driven spending. While subsidies are an important instrument of welfare delivery, their increasing dominance in state budgets raises concerns regarding fiscal sustainability, quality of expenditure, and long-term developmental priorities.

About State Finances 2024-25 Report 

The “State Finances 2024-25” report is an analytical publication released by the Comptroller and Auditor General (CAG) of India. It provides an evidence-based assessment of the fiscal performance of Indian States, focusing on revenue balance, fiscal deficit, expenditure quality, and fiscal discipline.

The report evaluates how States are managing their finances in relation to budget targets, Finance Commission recommendations, and fiscal consolidation norms.

Key Features of the State Finances Report

• It analyses fiscal outcomes of 28 States in 2024-25, including revenue balance, fiscal deficit, and expenditure trends.
• It compares budgeted fiscal targets with actual outcomes, including revenue surplus, revenue deficit, and zero-deficit targets.
• It assesses compliance with the 15th Finance Commission fiscal deficit benchmark of 3% of GSDP.
• It highlights trends in States’ Own Tax Revenue (SOTR) and GST contributions.
• It evaluates inter-state fiscal disparities and revenue performance.

State Finances 2024-25 Report Key Findings 

The State Finances 2024-25 report highlights widening inter-State disparities in fiscal performance, with simultaneous existence of surplus and high-deficit States. It underscores rising subsidy burden alongside persistent fiscal consolidation challenges, reflecting growing welfare orientation in State finances.

Revenue Surplus and Deficit Across States

• Of the 28 States, 18 targeted revenue surplus, 3 targeted revenue deficit and 7 targeted zero revenue deficit in FY 2024-25.
• Thirteen States recorded revenue surplus while 15 States remained revenue deficit.
• Of the 18 States targeting revenue surplus, only 9 achieved the target, while States such as Karnataka, Maharashtra, Assam, Bihar, Himachal Pradesh and Telangana slipped into deficit.
• Among States targeting zero revenue deficit, Goa, Jharkhand, Tripura and Uttar Pradesh achieved revenue surplus, while Punjab, Rajasthan and Tamil Nadu ended in deficit.
• Himachal Pradesh, Mizoram, Punjab and West Bengal continued to receive Finance Commission revenue deficit grants.
• The aggregate revenue deficit of deficit States stood at ₹3.46 lakh crore (1.5% of combined GSDP), while the net revenue deficit stood at ₹2.19 lakh crore (0.68% of combined GSDP).

Fiscal Deficit and Debt Position

• All 28 States recorded fiscal deficits in 2024-25.
• Eighteen States exceeded the Fifteenth Finance Commission’s fiscal deficit benchmark of 3% of GSDP.
• States witnessing a substantial increase in fiscal deficit included Andhra Pradesh, Assam, Gujarat, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Meghalaya, Mizoram, Nagaland, Odisha, Tripura and Uttarakhand.
• The combined liabilities of States increased to ₹90.51 lakh crore as on 31 March 2025, highlighting rising debt pressures.

Revenue Structure and Tax Mobilisation

• States’ own tax revenue accounted for nearly 50% of total revenue receipts amounting to ₹40.52 lakh crore.
• State GST contributed more than 43% of States’ own tax revenues.
• States’ own tax revenue more than doubled from ₹8.4 lakh crore in 2015-16 to ₹20.31 lakh crore in 2024-25.
• Tax collections recorded stronger growth in the post-GST period compared to the pre-GST era.
• The share of Grants-in-Aid and Central assistance in State revenues declined over the decade, indicating increasing dependence on States’ own resources.

Expenditure Profile of States

• Combined expenditure of all States stood at ₹51.20 lakh crore in 2024-25.
• Revenue expenditure accounted for nearly 80% of total expenditure.
• Committed expenditure (salaries, pensions and interest payments) exceeded 43% of total revenue expenditure.
• Committed expenditure, subsidies and grants together accounted for over 61% of revenue expenditure, reducing fiscal space for developmental spending.
• Education remained the largest expenditure head, followed by social welfare and energy.
• The economic sector accounted for 63% of total capital outlay, reflecting continued emphasis on infrastructure creation.

Subsidy Trends Across States

• Subsidy expenditure nearly tripled from ₹1.4 lakh crore in 2015-16 to ₹4.4 lakh crore in 2024-25.
• Subsidies grew faster than overall State expenditure, which increased only 2.3 times during the same period.
• Subsidies as a share of State GDP increased from 7.7% to 10.2%.
• Karnataka, Madhya Pradesh, Tamil Nadu and Punjab emerged as the highest subsidy-spending States, with subsidies exceeding 13.5% of total expenditure.
• Energy subsidies accounted for 43% of total subsidies, while agriculture accounted for 30%.
• Rajasthan recorded the highest power subsidy, followed by Karnataka.
• Maharashtra, Tamil Nadu, Karnataka, Madhya Pradesh and Rajasthan together accounted for ₹2.3 lakh crore or 54% of total subsidy spending.

Inter-State Variation in Subsidy Spending

• Six States spent over 10% of their expenditure on subsidies, while six States spent less than 1%.
• The lowest subsidy-spending States included Arunachal Pradesh, Sikkim, Nagaland, Meghalaya, Tripura and Assam.
• Kerala, Mizoram, Uttarakhand and Manipur spent less than 2% of expenditure on subsidies.
• Lower subsidy levels were associated with smaller consumer bases and limited industrial and irrigation activity.

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