{"id":63652,"date":"2026-01-07T19:19:55","date_gmt":"2026-01-07T13:49:55","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=63652"},"modified":"2026-01-09T13:01:44","modified_gmt":"2026-01-09T07:31:44","slug":"states-fiscal-stress-cag","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/07-01-2026\/states-fiscal-stress-cag","title":{"rendered":"CAG Flags States&#8217; Fiscal Stress"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/Economy<\/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>According to the Comptroller and Auditor General of India (CAG), India\u2019s states began <strong>FY24<\/strong> with <strong>robust revenue inflows<\/strong> but closed the year facing<strong> increasing fiscal strain.&nbsp;<\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Major Findings<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Total revenue receipts of states <\/strong>were at \u20b937.93 lakh crore in FY24.\n<ul class=\"wp-block-list\">\n<li><strong>States\u2019 own tax revenue formed the largest component<\/strong> at about 50%, followed by the share in Union taxes at nearly 30%, grants-in-aid at around 12% and non-tax revenue at just over 8%.&nbsp;<\/li>\n\n\n\n<li>Over the past decade, the share of own tax revenue and tax devolution has steadily increased, while dependence on grants has declined.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Disparities Among States:<\/strong> States such as Haryana, Maharashtra, Karnataka, Telangana, Tamil Nadu and Gujarat derived more than 60% of their revenue from their own taxes, while several northeastern and hill states, along with Bihar, remained heavily dependent on central transfers.<\/li>\n\n\n\n<li><strong>Rigidity in State Budgets: <\/strong>Committed expenditure such as salaries, pensions and interest payments absorbed a large share of revenue expenditure, with significant variation across states.<\/li>\n\n\n\n<li><strong>GST\u2019s Role: <\/strong>State GST remained the single-largest source of its own tax revenue. It accounted for about 43% of states\u2019 own tax collections.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Debt on States: <\/strong>Public debt of states reached \u20b967.87 lakh crore as of March 2024, equivalent to 23.42% of combined GSDP.\n<ul class=\"wp-block-list\">\n<li>Debt levels varied sharply, ranging from below 20% of GSDP in some states to over 50% in others, highlighting uneven fiscal resilience.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Deficit indicators: <\/strong>Revenue surplus was seen in 16 states whereas revenue deficit was visible in 12 states.\n<ul class=\"wp-block-list\">\n<li>Sharp rise in deficits is seen in Chhattisgarh, Karnataka, Maharashtra, Rajasthan, Telangana and Uttar Pradesh.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Liquidity Stress: <\/strong>Liquidity stress also emerged as a concern during FY24, with 16 states resorting to ways and means advances (WMA) from the Reserve Bank of India.\n<ul class=\"wp-block-list\">\n<li>Rajasthan, Andhra Pradesh and Telangana together accounted for about 62% of the total WMA and overdraft availed during the year.<\/li>\n\n\n\n<li>In contrast, 12 states did not avail of any WMA during FY24, reflecting wide divergence in liquidity positions across states.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Overall Assessment:<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Despite improved tax devolution and own-tax collections, <strong>state finances remain fragile.<\/strong><\/li>\n\n\n\n<li>High revenue expenditure, rising committed spending, growing debt and fiscal norm breaches <strong>constrain states\u2019 investment capacity and resilience to economic shocks.<\/strong><\/li>\n\n\n\n<li>The CAG has advised <strong>harmonization and rationalization of object heads across the Union and states,<\/strong> to be adopted from FY28, a reform seen as critical to improve the quality of public expenditure data.\n<ul class=\"wp-block-list\">\n<li><strong>Object heads <\/strong>are a component of the government\u2019s budget and accounting classification system that specify the purpose or nature of expenditure.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background has-fixed-layout\" style=\"background-color:#fff2cc\"><tbody><tr><td><strong>Components of Budget<\/strong><br><br>&#8211; <strong>There are three major components: <\/strong>expenditure, receipts and deficit indicators.\u00a0<br>&#8211; <strong>Total Expenditure <\/strong>can be <strong>divided into capital and revenue expenditure.\u00a0<\/strong><br>a. <strong>Capital expenditure<\/strong> is incurred with the purpose of increasing assets of a durable nature or of reducing recurring liabilities.\u00a0<br>b. <strong>Revenue expenditure <\/strong>involves any expenditure that <strong>does not add to assets or reduce liabilities.\u00a0<\/strong><br>&#8211; <strong>The receipts of the Government have three components:<\/strong> revenue receipts, non-debt capital receipts and debt-creating capital receipts.\u00a0<br>a. <strong>Revenue receipts <\/strong>involve receipts that are not associated with increase in liabilities and comprise revenue from taxes and non-tax sources.\u00a0<br>b. <strong>Non-debt receipts<\/strong> are part of capital receipts that do not generate additional liabilities, it includes recovery of loans and proceeds from disinvestments.\u00a0<br>c. <strong>Debt-creating capital receipts <\/strong>are ones that involve higher liabilities and future payment commitments of the Government.\u00a0<br>&#8211; <strong>Fiscal deficit<\/strong> is the difference between total expenditure and the sum of revenue receipts and non-debt receipts.\u00a0It a. indicates how much the Government is spending in net terms.\u00a0<br>b. <strong>Positive fiscal deficits indicate <\/strong>the amount of expenditure over and above revenue and non-debt receipts, it needs to be financed by a debt-creating capital receipt.\u00a0<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/www.livemint.com\/news\/india\/cag-states-debt-spending-revenue-fiscal-stress-11767197189054.html\" target=\"_blank\" rel=\"noopener\"><strong>LM<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong>Context<\/strong><\/p>\n<li class=\"ms-5\">According to the Comptroller and Auditor General of India (CAG), India\u2019s states began FY24 with robust revenue inflows but closed the year facing increasing fiscal strain.\u00a0<\/li>\n<p><\/p>\n<p><strong> Major Findings <\/strong><\/p>\n<li class=\"ms-5\">Total revenue receipts of states were at \u20b937.93 lakh crore in FY24. <\/li>\n<li class=\"ms-5\">States\u2019 own tax revenue formed the largest component at about 50%, followed by the share in Union taxes at nearly 30%, grants-in-aid at around 12% and non-tax revenue at just over 8%.\u00a0 <\/li>\n<li class=\"ms-5\">Over the past decade, the share of own tax revenue and tax devolution has steadily increased, while dependence on grants has declined. <\/li>\n<p><a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/07-01-2026\/states-fiscal-stress-cag\" class=\"btn btn-primary btn-sm float-end\">Read More<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-63652","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/63652","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\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=63652"}],"version-history":[{"count":3,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/63652\/revisions"}],"predecessor-version":[{"id":63711,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/63652\/revisions\/63711"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=63652"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=63652"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=63652"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}