Key facts
- States' aggregate expenditure increased by 131% between 2015-16 and 2024-25.
- Welfare and development activities were the main drivers of increased spending.
- Revenue expenditure constituted over 83% of total state spending.
- Committed expenses and subsidies accounted for more than half of revenue expenditure.
- Total state expenditure reached Rs 51.20 lakh crore in 2024-25.
- Budgetary spending averaged between 15.78% and 17.49% of GSDP over the decade.
States' aggregate expenditure has seen a significant surge of 131 percent between the fiscal years 2015-16 and 2024-25, according to a report by the Comptroller and Auditor General of India (CAG). This increase in spending has been largely driven by a focus on welfare and development activities.
Revenue expenditure continued to be the dominant component of state budgets, accounting for over 83 percent of total spending. Within revenue expenditure, committed expenses and subsidies consistently consumed more than half of the allocated funds, with subsidies experiencing particularly rapid growth. In 2024-25, these committed expenses and subsidies reached 53.31 percent of revenue expenditure.
The report highlights that the expenditure structure remained largely unchanged over the decade, with salaries, pensions, interest payments, subsidies, and grants together absorbing a substantial share, indicating fiscal rigidity. Despite the substantial increase in total expenditure, which rose from Rs 22.18 lakh crore in FY 2015-16 to Rs 51.20 lakh crore in 2024-25, the proportion of capital expenditure remained relatively smaller, although it increased in absolute terms.
States' budgetary spending as a percentage of combined Gross State Domestic Product (GSDP) ranged between 15.78 percent in FY25 and 17.49 percent in FY17. In 2024-25, the social sector accounted for the largest share of total expenditure at 39 percent, followed by the general sector (29.79 percent) and the economic sector (28.68 percent). Capital investment was predominantly directed towards the economic sector (62.71 percent), which includes infrastructure, industry, and trade, while the general sector was primarily revenue-oriented.
States' Own Tax Revenue (SOTR) remained the largest component of revenue receipts, with its share slightly increasing from approximately 49.55 percent to 50.13 percent, although its buoyancy weakened in FY 2024-25 compared to the previous year.