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States Struggle To Rein In Borrowings As Public Debt Mounts
As per a report by the Comptroller and Auditor General (CAG) of India, 13 states have crossed the recommended public debt limit in terms of Gross State Domestic Product (GSDP)
Jan 22, 2026 · 2 min read
The public debt of all the States has been mounting progressively, which makes it evident that the States have been struggling to rein in borrowings. As per a report by the Comptroller and Auditor General (CAG) of India, 13 states have crossed the recommended public debt limit in terms of Gross State Domestic Product (GSDP).
At present, the total public debt of the States stands at ₹67.87 lakh crore, which is close to 179% of their total revenue. Despite an increase in state revenues, there has been no significant structural change in expenditure patterns.
According to the report, in the previous financial year, the total revenue receipts of States amounted to ₹37.93 lakh crore. Of this, around 50% came from states’ own tax revenue (SOTR), 30% from the share in central taxes,12% from grants-in-aid, and 8% from non-tax revenue. Based on data from the last ten years (2014-15 to 2023-24), the share of states’ own tax revenue averaged 47%, which increased to nearly 50% in 2023-24.
Haryana, Maharashtra, Karnataka, Telangana, Tamil Nadu, and Gujarat are the six States for which the SOTR accounts for 60% or more of the total revenue. In Gujarat, this proportion stands at around 60%, reflecting the state’s strong tax collection capacity.
In the last financial year, the total budget expenditure of all States stood at ₹46.81 lakh crore, which is about 16.15% of the combined GSDP. Of this, 83.25% was revenue expenditure, while only 16.47% was capital expenditure. Over the past ten years, the total state expenditure has increased by 146%. Yet, the dominance of revenue expenditure in the spending structure has remained unchanged.
Rising Public Debt A Major Fiscal Challenge
The report notes that “committed expenditure”, such as salaries, pensions, and interest payments on debt, accounted for 43.28% of the total revenue expenditure in 2023-24. The share of subsidies stood at 8.48%. When grants-in-aid (salary-related) are added, more than half of the states’ revenue expenditure is locked into committed spending.
The report presents a mixed picture. While states’ revenues and their share in central taxes have increased, rigidity in the expenditure structures persists. Mandatory spending on salaries, pensions, subsidies, and interest payments continues to reduce fiscal flexibility. In the future, enhancing development-oriented capital expenditure while containing the public debt burden will be a major challenge for the States.
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