States’ fiscal stress deepens despite revenue gains

India’s states entered FY24 with stronger revenue inflows but ended the year under mounting fiscal stress, as rising debt and fixed spending commitments eroded fiscal flexibility, the Comptroller and Auditor General of India (CAG) said.

- Dhirendra Kumar

More than half of their revenue expenditure was locked into salaries, pensions, interest payments and subsidies, limiting room for investment or shock absorption despite improved collections, according to the State Finances 2023-24 report.

The second edition of the publication, released by CAG K. Sanjay Murthy, presents a consolidated and audited assessment of the finances of all 28 states, allowing comparisons across states and over a decade from FY15 to FY24.

The report shows total revenue receipts of states were at ₹37.93 lakh crore in FY24. States’ own tax revenue formed the largest component at about 50%

of these receipts, followed by the share in Union taxes at nearly 30%, grants-in-aid at around 12% and non-tax revenue at just over 8%. Over the past decade, the share of own tax revenue and tax devolution has steadily increased, while dependence on grants has declined.