{"id":54686,"date":"2025-09-20T19:53:49","date_gmt":"2025-09-20T14:23:49","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=54686"},"modified":"2025-09-23T14:49:06","modified_gmt":"2025-09-23T09:19:06","slug":"cag-report-states-fiscal-health","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/20-09-2025\/cag-report-states-fiscal-health","title":{"rendered":"CAG Report on States Fiscal Health: Decadal Surge in Public Debt"},"content":{"rendered":"\n<p><strong>Syllabus: GS2\/ Polity and Governance<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The <strong>Comptroller and Auditor General (CAG)<\/strong> has released a decadal analysis of the fiscal health of India\u2019s 28 states, highlighting a sharp rise in public debt over the last decade.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key Findings of the Report<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Debt Growth: <\/strong>States\u2019 combined public debt trebled from <strong>\u20b917.57 lakh crore<\/strong> in 2013-14 to <strong>\u20b959.60 lakh crore<\/strong> in 2022-23. As a share of GSDP, debt rose from 16.66% (2013-14) to 22.96% (2022-23).\n<ul class=\"wp-block-list\">\n<li>In FY 2022-23, states\u2019 total debt was <strong>22.17%<\/strong> of India\u2019s GDP.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>State-wise Debt-to-GSDP Ratios (2022-23):<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>Highest:<\/strong> Punjab (40.35%), Nagaland (37.15%), West Bengal (33.70%).<\/li>\n\n\n\n<li><strong>Lowest: <\/strong>Odisha (8.45%), Maharashtra (14.64%), Gujarat (16.37%).<\/li>\n\n\n\n<li>8 states recorded debt over 30% of GSDP, while 6 states had debt under 20%.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Debt and Revenue Receipts:<\/strong>\n<ul class=\"wp-block-list\">\n<li>States\u2019 debt stood at <strong>128\u2013191%<\/strong> of revenue receipts in the past decade.<\/li>\n\n\n\n<li>On average, debt equaled <strong>150%<\/strong> of revenue receipts \/ non-debt receipts.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Reasons for Higher Debt Burden<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Populist Politics:<\/strong> Power subsidies, farm loan waivers, cash transfers, old pension scheme revival, often funded by borrowings.\n<ul class=\"wp-block-list\">\n<li><strong>Competitive Populism: <\/strong>States like Punjab, Rajasthan, Himachal Pradesh have adopted costly welfare schemes, aggravating fiscal stress.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong><a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/24-05-2021\/impact-of-covid-19-on-government-finances\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/ca\/current-affairs\/24-05-2021\/impact-of-covid-19-on-government-finances\">Impact of COVID-19<\/a>: <\/strong>Debt-to-GSDP ratio jumped from 21% (2019-20) to 25% (2020-21) due to contraction in GSDP and additional borrowings.<\/li>\n\n\n\n<li><strong>Dependence on GST: <\/strong>After GST rollout, states lost independent taxation powers (like octroi, entry tax). GST compensation ended in June 2022, creating a gap.<\/li>\n\n\n\n<li><strong>Borrowing for Current Expenditure<\/strong>: The report flagged a breach of the <strong>&#8216;golden rule&#8217;<\/strong> of borrowing, which says governments should raise debt only for investment, not to fund operating costs.\n<ul class=\"wp-block-list\">\n<li>CAG found in 11 states (Punjab, Tamil Nadu, West Bengal, Andhra Pradesh, etc.), more than half of net borrowings were used for salaries, pensions, subsidies rather than infrastructure.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What are the Concerns?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Crowding Out:<\/strong> Large SDL borrowings push up interest rates, raising borrowing costs for private firms.<\/li>\n\n\n\n<li><strong>Inflationary Pressures:<\/strong> Excessive debt-fueled spending can fuel inflation, especially when directed at consumption subsidies.<\/li>\n\n\n\n<li><strong>Interest &amp; Debt Servicing Pressure:<\/strong> Rising share of market borrowings (SDLs) at high interest rates increases repayment burden.\n<ul class=\"wp-block-list\">\n<li>In some states, 20\u201325% of revenue receipts go towards interest payments, leaving little for development expenditure.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Centre-State Fiscal Balance:<\/strong> Central government\u2019s own debt (~57% of GDP in FY24) along with rising state debt (~23% of GDP) push India\u2019s general government debt to ~80% of GDP, much higher than the 60% target under FRBM Review Committee.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background\" style=\"background-color:#fff2cc\"><tbody><tr><td><strong>Comptroller and Auditor General of India (CAG)<\/strong><br>&#8211; The CAG is the <strong>supreme audit authority of India,<\/strong> responsible for auditing government accounts and ensuring accountability in public finance management.&nbsp;<br>&#8211; <strong>Articles 148 to 151<\/strong> of the Indian Constitution provide the framework for the appointment, duties, and reporting structure of the CAG.&nbsp;<br>&#8211; <strong>The Comptroller and Auditor General\u2019s (Duties, Powers and Conditions of Service) Act, 1971<\/strong>, determines the CAG\u2019s service conditions and prescribes the duties and powers of their office.&nbsp;<br><strong>Audits Reports Submitted by CAG to the President of India<\/strong><br>&#8211; Comptroller and Auditor General (CAG) of India submits <strong>three audit reports <\/strong>to the President of India (Article 151).<br>1. <strong>Audit report on appropriation accounts:<\/strong> This report shows how the legislature-granted money was allocated to different heads of expenditure and grants. It also verifies if the money was spent for the intended purpose.<br>2. <strong>Audit report on finance accounts: <\/strong>This report shows the annual receipts and expenditures of the country.<br>3. <strong>Audit report on public undertakings: <\/strong>This report covers the finances and expenditures of various Public Sector Undertakings (PSUs).<br>&#8211; After receiving the reports, the President lays them before both houses of Parliament. <strong>The Public Accounts Committee (PAC) <\/strong>then examines the reports and submits its findings to Parliament.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Way Ahead<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Adherence to Fiscal Responsibility:<\/strong> States must align with FRBM targets and ensure debt sustainability.<\/li>\n\n\n\n<li><strong>Prioritising Capital Spending: <\/strong>Shift away from subsidies and non-productive current expenditures toward investments in infrastructure, health, education that deliver long-term growth.<\/li>\n\n\n\n<li><strong>Revenue Mobilisation: <\/strong>Strengthening tax collection, rationalising subsidies, and expanding non-tax revenue are key.<\/li>\n\n\n\n<li><strong>Centre-State Coordination: <\/strong>Transparent debt management and conditional borrowing linked to reforms can improve fiscal discipline.<\/li>\n<\/ul>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/indianexpress.com\/article\/india\/ex-odisha-mla-george-tirkey-dies-67-10260705\/?ref=infinite\" rel=\"nofollow noopener\" target=\"_blank\"><strong>IE<\/strong><\/a><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<h3><strong>Context<\/strong><\/h3>\n<li class=\"ms-5\">The Comptroller and Auditor General (CAG) has released a decadal analysis of the fiscal health of India\u2019s 28 states, highlighting a sharp rise in public debt over the last decade.<\/li>\n<p><\/p>\n<h3><strong>Key Findings of the Report<\/strong><\/h3>\n<li class=\"ms-5\">Debt Growth: States\u2019 combined public debt trebled from \u20b917.57 lakh crore in 2013-14 to \u20b959.60 lakh crore in 2022-23. As a share of GSDP, debt rose from 16.66% (2013-14) to 22.96% (2022-23).<\/li>\n<li class=\"ms-5\">In FY 2022-23, states\u2019 total debt was 22.17% of India\u2019s GDP.<\/li>\n<p><a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/20-09-2025\/cag-report-states-fiscal-health\" class=\"btn btn-primary btn-sm float-end\">Read\u00a0More<\/a><\/p>\n","protected":false},"author":15,"featured_media":54692,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-54686","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2025\/09\/cag-report-states-fiscal-health.png","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/54686","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=54686"}],"version-history":[{"count":4,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/54686\/revisions"}],"predecessor-version":[{"id":54847,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/54686\/revisions\/54847"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/54692"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=54686"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=54686"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=54686"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}