<\/p>
Indicating a worrying situation for state finances, a new report has revealed that revenue expenditure continued to take up most of the Budget of states and fiscal pressures have mounted for a large number of them. The findings are a part of the Publication on State Finances 2024-25 that was released by the Comptroller and Auditor General of India on Tuesday.<\/p>
The Publication, which provides a comparative overview of the finances of all 28 States over the 10-year period from 2015-16 to 2024-25\u00a0revealed that revenue expenditure continued to dominate budgets, averaging over 83% of the total spending. Capital expenditure increased in absolute terms but remained a relatively smaller share.<\/p>
Social and economic services together accounted for about two-thirds of total expenditure, reflecting States\u2019 focus on welfare and development. Further, committed expenditure and subsidies consistently absorbed more than half of revenue expenditure, reaching 53.31% in FY25, with subsidies growing particularly rapidly. Grants-in-aid also expanded significantly and continued to claim nearly one-third of revenue spending.<\/p>
\u201cBetween 2015\u201316 and 2024-25, States\u2019 aggregate expenditure rose sharply by 131%, broadly keeping pace with economic growth,\u201d it said. It noted that over the period 2015\u201316 to 2024-25, despite a substantial increase in total expenditure, the expenditure structure remained largely unchanged, with salaries, pensions, interest payments, subsidies and grants together absorbing a substantial share, indicating fiscal rigidity.<\/p>
More worryingly, the report revealed that as many as 18 states had fiscal deficits above the threshold of 3% that had been recommended by the 15th\u00a0Finance Commission. Noting that Budget balance indicators are important markers of the fiscal health of the states, it said that during FY25, a total of 13 states were in revenue surplus, while 15 states were in revenue deficit.<\/p>
The states that witnessed over 25%\u00a0 increase in fiscal deficit in FY25 versus FY24 were Andhra Pradesh, Assam, Gujarat, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Meghalaya, Mizoram, Nagaland, Odisha, Tripura and Uttarakhand.<\/p>
Overall, the report noted that the fiscal position of states presents a mixed picture in FY2525. States\u2019 Own Tax Revenue (SOTR) is the largest component of revenue receipts, rising to 50.13% in share from 49.55%.<\/p>
Buoyancy, however, weakened in FY25 over FY24. The States\u2019 share in Union taxes grew markedly, reflecting higher tax devolution under the Fourteenth and Fifteenth Finance Commissions, while reliance on grants in-aid and central assistance declined, it further noted.<\/p>
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