STATE FINANCES PUBLICATION 2025
23.09.2025
STATE FINANCES PUBLICATION 2025
Context
The Comptroller and Auditor General (CAG) released the State Finances Publication 2025, highlighting key fiscal trends across Indian states. The report revealed that salary expenditure of states has multiplied 2.5 times in a decade to ₹16.6 lakh crore, while public debt surged 3.4 times, reaching ₹59.6 lakh crore, raising concerns over fiscal sustainability.
About State Finances Publication 2025 by CAG
The State Finances Publication is an annual exercise by the CAG to evaluate the fiscal health of all 28 states. It provides data-driven insights on revenues, debt, expenditure priorities, and compliance with fiscal responsibility norms.
Key Features:
- Offers a holistic assessment of state-level finances for policymakers, researchers, and civil society.
- Tracks trends in public debt, subsidies, committed expenditure, and fiscal management.
- Acts as a reference for measuring states’ adherence to sustainable finance practices.
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Provision |
Description |
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Article 148 |
Deals with the appointment, oath, and conditions of service of the CAG of India. |
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Article 149 |
Specifies the duties and powers of the CAG of India. |
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Article 150 |
States that Union and State accounts are kept in a form prescribed by the President on CAG’s advice. |
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Article 151 |
Requires CAG’s Union reports to be submitted to the President for Parliament, and State reports to the Governor for State Legislature. |
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Article 279 |
Provides that CAG certifies the calculation of "net proceeds," and such certificate is final. |
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Third Schedule |
Section IV prescribes the oath or affirmation to be made by Supreme Court Judges and the CAG on assuming office. |
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Sixth Schedule |
Accounts of District or Regional Councils kept as prescribed by CAG and audited, with reports submitted to the Governor for the Council. |
Key Findings from the 2025 Report
Salary Bills
- Salary outgo grew 2.5 times between 2013–14 and 2022–23, amounting to ₹16.6 lakh crore.
- Salaries form the largest portion of committed expenditure, limiting fiscal flexibility for developmental spending.
Subsidy Burden
- Subsidy bills tripled to ₹3.09 lakh crore in a decade.
- Punjab recorded the highest reliance, spending 17% of its total expenditure on subsidies.
- Rising subsidies indicate growing fiscal stress amid populist measures.
Committed Expenditure
- Nearly 43.5% of states’ revenue expenditure was locked in committed liabilities (salaries, pensions, and interest payments).
- Highest levels were reported in Nagaland (74%) and Kerala (63%), leaving limited space for capital investment.
Rising Public Debt
- Public debt expanded 3.4 times to ₹59.6 lakh crore, forming about 23% of combined GSDP.
- This trajectory signals a medium-term fiscal risk if revenue growth does not keep pace.
Union Tax Devolution
- On average, around 27% of central taxes were devolved to states.
- Five states—Uttar Pradesh, Bihar, Madhya Pradesh, West Bengal, and Maharashtra—together received 50% of devolved resources.
- Fiscal devolution remains a critical lifeline for poorer states.
Strategic and Policy Relevance
- For States: Data underscores the need to balance welfare commitments with fiscal discipline.
- For Centre: Highlights the importance of stable and predictable transfers under Finance Commission awards.
- For Investors & Analysts: Provides a realistic picture of states’ creditworthiness and fiscal space.
Challenges
- Rising Debt: Escalating liabilities may crowd out developmental spending.
- Limited Flexibility: High committed expenditure leaves little room for infrastructure investments.
- Subsidy Pressure: Populist measures risk undermining fiscal sustainability.
- Regional Disparities: Dependence on Union tax transfers is uneven, with poorer states more reliant.
Conclusion
The State Finances Publication 2025 by CAG serves as a critical reminder that fiscal prudence is as important as welfare spending. While states must invest in salaries, subsidies, and social commitments, they must also adopt reforms to improve revenue mobilization, control debt, and prioritize productive capital expenditure. Sustainable fiscal management is vital to ensure both economic growth and intergenerational equity.