Paper: GS-III, Subject: Economy, Topic: Growth and Development, Issue: CAG Report on States
Context:
According to a recent first-of-its-kind report by the Comptroller and Auditor General of India (CAG), the public debt of all 28 states combined in India has tripled over the last decade, rising from ₹17.57 lakh crore in 2013-14 to ₹59.60 lakh crore in 2022-23.
- This dramatic increase signals mounting fiscal pressure and poses significant risks to the financial health of states, impacting their ability to fund development and welfare programs effectively.
Key Points from the CAG Report:
The CAG report reveals several key trends in the fiscal health of states:
- Trebling of Public Debt: The combined public debt of all 28 states has trebled in the last 10 years, from Rs 17.57 lakh crore in 2013-14 to Rs 59.60 lakh crore in 2022-23.
- Composition of Public Debt: The report provides a detailed breakdown of the composition of public debt, including internal debt, loans from the central government, and other liabilities.
- Debt-to-GSDP Ratio: The report analyzes the debt-to-GSDP (Gross State Domestic Product) ratio for each state, which is a key indicator of debt sustainability.
- Interest Payments: The report highlights the increasing burden of interest payments on state budgets, which diverts resources from developmental activities.
- Fiscal Deficit: The report examines the fiscal deficit of states, which is the difference between their revenue and expenditure, and its impact on public debt.
| About the Comptroller and Auditor General of India (CAG) The Comptroller and Auditor General (CAG) is an independent authority established by the Constitution of India to audit the receipts and expenditures of the Central Government, State Governments, and other bodies that receive funding from the Government. Since it is established directly under the provisions of the Constitution, it is a Constitutional Body. The CAG is an All-India body in the sense that it controls the entire financial system of the country at both the Central and the State levels. The CAG heads the Indian Audit & Accounts Department and acts as the Guardian of the Public Purse. Fiscal Consolidation: Fiscal consolidation refers to the process of reducing fiscal deficits and public debt by adjusting expenditure and revenue policies. Indian States have achieved significant fiscal consolidation after the Covid-19 pandemic, reducing their fiscal deficits from 4.1% of GDP (Gross Domestic Product) in 2020-21 to 2.9% of GDP in 2023-24 (BE). Fiscal Responsibility and Budget Management (FRBM) Act The Fiscal Responsibility and Budget Management (FRBM) Act was enacted in 2003. It led to the framing of FRBM Rules in 2004 that sets targets for the Central government to ensure fiscal discipline. Amendment: In 2018, the Centre is mandated to take appropriate steps to limit its fiscal deficit to 3% of GDP by March 31, 2021 although this is an operational target.The mandated target pertains to the Centre’s debt-GDP ratio which is to be brought down to 40%. |
For example:
- Punjab: Punjab has one of the highest debt-to-GSDP ratios in the country, which has led to concerns about its fiscal sustainability.
- Rajasthan: Rajasthan’s public debt has been increasing rapidly in recent years, putting pressure on its finances.
- Kerala: Kerala’s high debt levels have constrained its ability to invest in developmental activities.
These states need to take urgent steps to address their fiscal challenges and ensure their long-term financial stability.
State Fiscal Challenges and Policy Measures
The sharp rise in states’ public debt threatens India’s fiscal stability and growth. Without stronger fiscal discipline, better revenue systems, and focused expenditure reforms, states risk crises that could undermine development. Centre–state coordination and robust management are vital to ensure sustainable and inclusive growth.
La Excellence IAS Academy, the best IAS coaching in Hyderabad, known for delivering quality content and conceptual clarity for UPSC 2025 preparation.
FOLLOW US ON:
◉ YouTube : https://www.youtube.com/@CivilsPrepTeam
◉ Facebook: https://www.facebook.com/LaExcellenceIAS
◉ Instagram: https://www.instagram.com/laexcellenceiasacademy/
GET IN TOUCH:
Contact us at info@laex.in, https://laex.in/contact-us/
or Call us @ +91 9052 29 2929, +91 9052 99 2929, +91 9154 24 2140
OUR BRANCHES:
Head Office: H No: 1-10-225A, Beside AEVA Fertility Center, Ashok Nagar Extension, VV Giri Nagar, Ashok Nagar, Hyderabad, 500020
Madhapur: Flat no: 301, survey no 58-60, Guttala begumpet Madhapur metro pillar: 1524, Rangareddy Hyderabad, Telangana 500081
Bangalore: Plot No: 99, 2nd floor, 80 Feet Road, Beside Poorvika Mobiles, Chandra Layout, Attiguppe, Near Vijaya Nagara, Bengaluru, 560040
