{"id":65589,"date":"2025-09-29T11:09:14","date_gmt":"2025-09-29T05:39:14","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=65589"},"modified":"2025-09-29T13:09:55","modified_gmt":"2025-09-29T07:39:55","slug":"cag-report-macro-fiscal-health","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/cag-report-macro-fiscal-health\/","title":{"rendered":"CAG Report on States\u2019 Macro-Fiscal Health &#8211; Explained"},"content":{"rendered":"<h2 style=\"text-align: justify;\"><strong>CAG Report Latest News<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The CAG\u2019s decadal analysis of States\u2019 macro-fiscal health highlights uneven revenue sources, rising debt burdens, and the welfare paradox shaping fiscal sustainability across India.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Introduction<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">India\u2019s States collectively manage some of the largest public budgets in the world, often surpassing those of smaller countries in size.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The recently released decadal analysis of <\/span><b>States\u2019 macro-fiscal health by the <\/b><a href=\"https:\/\/vajiramandravi.com\/upsc-exam\/comptroller-and-auditor-generalcag\/\" target=\"_blank\"><b>Comptroller and Auditor General<\/b><\/a><b> (CAG)<\/b><span style=\"font-weight: 400;\"> offers a crucial snapshot of how reforms, growth, and crises such as the pandemic have shaped their fiscal trajectories.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">While some States reported impressive revenue surpluses, others struggle under heavy debt burdens, revealing stark disparities in fiscal sustainability and policy choices.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>States\u2019 Macro-Fiscal Landscape in India<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">In the early 2000s, Indian States were burdened with chronic deficits. Reforms in tax collection, GST implementation, and high growth during the 2010s improved finances, with some States recording surpluses.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">However, the pandemic reversed these gains, as <\/span><b>shrinking revenues and soaring emergency expenditure<\/b><span style=\"font-weight: 400;\"> pushed most States back into fiscal distress.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">States today present a mixed picture: while richer States like Maharashtra fund a large share of their expenditure internally, poorer States such as Arunachal Pradesh remain highly dependent on Union transfers.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This <\/span><b>vertical imbalance<\/b><span style=\"font-weight: 400;\"> in fiscal capacity underscores the unevenness of India\u2019s federal fiscal architecture.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Uneven Revenue Sources<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The CAG report shows that States rely on highly variable revenue streams. For example:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Kerala\u2019s lotteries<\/b><span style=\"font-weight: 400;\"> contributed nearly Rs. 12,000 crore in 2022-23.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Odisha\u2019s mining royalties<\/b><span style=\"font-weight: 400;\"> made up 90% of its non-tax income.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Telangana raised nearly Rs. 9,800 crore<\/b><span style=\"font-weight: 400;\"> through land sales.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Such revenues are volatile and unsustainable: lotteries depend on sales, royalties on global commodity prices, and land cannot be sold repeatedly.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Even surplus-earning States like Uttar Pradesh generated only <\/span><b>42% of their receipts internally<\/b><span style=\"font-weight: 400;\">, leaning heavily on central transfers.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Rising Borrowings and Debt Burden<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The fiscal health of States is also reflected in their borrowing patterns:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Andhra Pradesh<\/b><span style=\"font-weight: 400;\"> tripled its borrowings to Rs. 1.86 lakh crore by 2022-23, with debt reaching 35% of GSDP.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Bihar<\/b><span style=\"font-weight: 400;\"> doubled its borrowings, pushing debt close to 39% of GSDP.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Kerala\u2019s debt burden<\/b><span style=\"font-weight: 400;\"> remained high at 37% of GSDP despite curbing borrowings post-pandemic.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Punjab<\/b><span style=\"font-weight: 400;\"> continued its fiscal stress with liabilities touching 45% of GSDP.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">In contrast, <\/span><b>Odisha reduced borrowings<\/b><span style=\"font-weight: 400;\">, lowering debt to 15% of GSDP, the lowest in India.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The pandemic was a turning point: while some States like Karnataka and Maharashtra cut back borrowings after 2021, others like Andhra Pradesh, Telangana, and Rajasthan kept expanding them, signalling divergent fiscal strategies.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>The Welfare Paradox<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A striking theme of the CAG analysis is the <\/span><b>welfare paradox<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Despite reporting surpluses or stable debt, many States underfund key welfare sectors such as education, health, and rural infrastructure.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Instead, reliance on <\/span><b>off-budget loans, GST compensation arrears, and central transfers<\/b><span style=\"font-weight: 400;\"> creates a fa\u00e7ade of fiscal stability.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Political populism adds another layer. Free power, farm waivers, and cash transfers defer costs into opaque mechanisms like guarantees and special-purpose vehicles.\u00a0<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Implications for Fiscal Federalism<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The CAG findings highlight deeper structural issues in India\u2019s fiscal federalism:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Dependence on volatile revenues<\/b><span style=\"font-weight: 400;\"> limits the States\u2019 capacity to plan long-term welfare.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Rising borrowings<\/b><span style=\"font-weight: 400;\"> pose risks of debt overhang, especially in poorer and smaller States.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Vertical fiscal imbalance<\/b><span style=\"font-weight: 400;\"> perpetuates reliance on the Centre, undermining financial autonomy.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Populist welfare policies<\/b><span style=\"font-weight: 400;\"> erode fiscal discipline while failing to deliver sustainable outcomes.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The analysis suggests that India\u2019s States must prioritise <\/span><b>capital expenditure over routine subsidies<\/b><span style=\"font-weight: 400;\">, diversify revenue sources, and strengthen fiscal transparency.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Without such reforms, India risks sustaining one of the <\/span><b>largest welfare States in the world on one of the thinnest fiscal bases<\/b><span style=\"font-weight: 400;\"> among middle-income economies.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Conclusion<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400; text-align: justify;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The CAG\u2019s decadal review underscores the complexity of States\u2019 macro-fiscal health.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400; text-align: justify;\" aria-level=\"1\"><span style=\"font-weight: 400;\">While some States like Odisha demonstrate prudent fiscal management, others, such as Punjab and Kerala, remain vulnerable to debt traps and volatile revenues.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400; text-align: justify;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The welfare paradox, lavish spending amid weak revenues, reflects the tension between developmental needs and fiscal sustainability.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400; text-align: justify;\" aria-level=\"1\"><span style=\"font-weight: 400;\">For India\u2019s federal system to remain resilient, States must pursue <\/span><b>balanced fiscal strategies that combine growth, welfare, and sustainability<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><b>Source:<\/b><strong> <a href=\"https:\/\/www.thehindu.com\/business\/Economy\/analysing-indian-states-macro-fiscal-health\/article70105107.ece#:~:text=India&#039;s%20States%20inhabit%20starkly%20different,own%2C%20relying%20on%20Union%20transfers.\" target=\"_blank\" rel=\"nofollow noopener\">TH<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A new CAG report highlights India\u2019s States\u2019 macro-fiscal health, revealing uneven revenue sources.<\/p>\n","protected":false},"author":21,"featured_media":65674,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[2959,60,22,59],"class_list":{"0":"post-65589","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"tag-cag-report","9":"tag-mains-articles","10":"tag-upsc-current-affairs","11":"tag-upsc-mains-current-affairs","12":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/65589","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/21"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=65589"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/65589\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/65674"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=65589"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=65589"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=65589"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}