State of State Finances 2025-26

In 2023-24, states recorded a revenue deficit, with 53% of revenue receipts being spent on salaries, pensions, and interest payments, and 9% on subsidies.  GST revenues remain below the pre-2017 levels of subsumed revenue.  Untied transfers to states from the Centre have also declined during the 15^th Finance Commission period, reducing states’ spending autonomy.  The Special Assistance Scheme to States for Capital Investment (SASCI) has become a major source for funding of capital outlay in states.  However, the unconditional component of SASCI has declined in the last two years.  An increasing number of states are implementing unconditional cash transfer schemes, affecting their expenditure capacity to spend on other development heads.  The aggregate outstanding debt of states continues to be higher than the recommended level, implying a significant debt servicing burden on states.  Inequality in per capita income is increasing as higher income states generate higher per capita revenues and therefore can invest more in development.  States with lower per capita incomes have limited fiscal space to spend resources on growth-enhancing expenditure.

In this backdrop, this report analyses the finances of all states and the Union Territories of Delhi, Jammu and Kashmir, and Puducherry, based on their budget documents and CAG accounts.  The following abbreviations have been used for states in the charts throughout the report.