W.Hen India’s National Auditor, Comptroller and Auditor General (CAG) issued a decadel analysis on the Macro-Fichel Health of the states, a headline had somehow labeled as a backward state leggings in fiscal performance, a rapid journey compared to anything revealed in the study.
This number, which is more than doubled from the surplus of Gujarat, is proof that India’s most populous state changed a corner. However, by focusing only on the number, he missed a large picture. Only narrowing on arithmetic surpluses can limit analytical interpretation if the formation made for the rule of a state, operation mechanics and options are not studied more overall.
Economists often urge high capital expenses for development, while preventing regular costs. These numbers decide whether there are new ventilaters in someone’s neighborhood hospital; Does a school get enough teachers; And will the roads of the village be repaired this year. The states of India run some of the largest budgets in the world – larger than many countries. Cumulatively, due to constitutional separation of powers, they spend more than the central government on health and welfare. However one should ask: Do states earn enough to pay their bills? Or are they borrowing?
Uneven revenue
In the early 2000s, the states were often deeper in losses, spending more than they were earned. Improvements, better tax collections, and increasing growth helped to turn several corners by the end of 2010, with anything surplus reporting. But the epidemic was a significant turn – the tax revenue shrunk, while the emergency spending increased, pushed almost every state back. Today, the picture is mixed. While some states appear comfortable, most of their stability rests on unstable sources such as lottery, mining royalty, or land sales.
The states of India live in different fiscal worlds, like its diverse ethnic-linguistic identity. Maharashtra raised about 70% of its receipts in 2022-23, while managed only 9% in Arunachal Pradesh. Uttar Pradesh, despite a surplus, relying on the transfer of the Sangh, only 42% was born in itself. Economically, it is referred to as a vertical imbalance – rich states fund itself, while poor people bow down to Delhi.
Kerala’s lottery industry earned around ₹ 12,000 crore in 2022-23; Odisha attracted 90% of her non-tax income from mining royalty; And Telangana sold a price of ₹ 9,800 crore. However, the lottery sales, royalty at global prices, and land cannot be sold twice.
Gross loan credit
Let’s analyze numbers from CAG’s decadel analysis report. When the states earn more than they spend more, they borrow more. They mainly complete the deficit through debt or bonds that should be repaid with interest. The CAG, through its audited state finance reports, brings us a consolidated national picture, while the RBI’s State Finance: A study of the budget report provides a consistent framework for comparison. Together, these sources suggest that borrowing patterns between 2016–17 and 2022-23 have rapidly deviated in India.
Table 1 It belongs to states like Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Chhattisgarh and Goa. Andhra Pradesh converted its loan to ₹ 1.86 lakh crore, while Bihar doubled it, making the loan a regular tool for poor states as well. In contrast, Goa placed a tight lid on the borrowing, standing as a rare conservative. Nevertheless, the weight of these options has been shown from the data of liabilities: Andhra Pradesh’s debt load reached 35% of its GDP (GSDP) by 2023, and about 39% of Bihar, the highest in India. Assam’s rapid borrowings were cured by development, slightly less than 22% of GSDP with liabilities, while Goa stood at 27%, yet high for a small state.
Table 2 Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Kerala and Madhya Pradesh are related. Here, borrowings increased in a measured but continuously. Haryana increased from 28,170 crore in 2016-17 to ₹ 80,649 crore in 2022-23, despite being one of the rich states, almost reduced its lending to three times; Its liabilities also climbed about 31% of GSDP. Gujarat gradually moved upwards, of 27,668 crores, from 52,333 crore, while keeping its debt burden stable with 19-20% of GSDP. Madhya Pradesh also almost doubled its borrowing, which increased from ₹ 29,847 crore to ₹ 58,867 crore, with the liabilities increased by about 29%.
The epidemic brought instability. Karnataka’s loan increased to ₹ 84,828 crore in 2020-21, back down before ₹ 44,549 crore; Even after sorting, its liabilities were close to 28% of GSDP. Kerala reached ₹ 69,735 crore and later increased to ₹ 54,007 crore, although the burden of its debt was at about 37% of GSDP, strongly high. Small states remained modest – Himachal Pradesh liabilities reached about 48% of their GSDP, while Jharkhand borrowed ₹ 7,000- of 13,500 crore with a stable load of 27% of GSDP.
Table 3 Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha and Punjab belong to. This cluster highlights the extremes. Before modeling ₹ 94,702 crore in 2022-23, Maharashtra borrowed to ₹ 1,18,516 crore in 2018-19 to reduce ₹ 26,025 crore in 2018-19. However, its large economy kept the loan burden at about 20% of GSDP. Punjab was a consecutive high, with ₹ 83,627 crore in 2016-17 and ₹ 89,544 crore in 2022-23; Its liabilities climbed about 45% of GSDP, showing chronic tension. Odisha promoted this trend, thanks to mining for mining, cut down ₹ 11,223 crore to just ₹ 5,347 crore loan, and its liabilities fell to about 15% of GSDP, the lowest in India.
Manipur’s credit increased from ₹ 1,551 crore to ₹ 11,116 crore; Meghalaya from ₹ 1,210 crore to ₹ 6,221 crore; Mizoram ₹ 756 crore to ₹ 4,019 crore; And Nagaland ₹ 5,444 crore to ₹ 7,159 crore. Although small number of small numbers, these states carry some of the heaviest burdens, with liabilities of up to 40–60% of GSDP, which marks the growing fiscal dependence.
Table 4 Rajasthan, Sikkim, Tamil Nadu, Telangana, Tripura, Uttar Pradesh, Uttarakhand and West Bengal are shown. Rajasthan and Tamil Nadu emerged as heavy borrowers. Rajasthan ranged its borrowings from ₹ 43,889 crore to ₹ 1,60,565 crore in 2022-23 in 2016-17, one of the most mountains of nationwide, and its liabilities rose to about 40% of GSDP. Tamil Nadu continuously increased to ₹ 66,143 crore above ₹ 1,01,062 crore, while its debt ratio increased to about 33%. Telangana increased from ₹ 44,819 crore to ₹ 1,26,884 crore, although the strong growth kept its liabilities at about 28%.
West Bengal witnessed moderate growth, ranging from ₹ 37,524 crore to ₹ 70,243 crore, with liabilities at 37% of GSDP. In contrast, Uttar Pradesh lended a little less than ₹ 67,685 crore in 2016-17, in 2022-23 in 2022-23, 66,847 crore, kept its liabilities stable up to 31%. Uttarakhand’s borrowings also increased from ₹ 10,592 crore to ₹ 9,431 crore, but the liabilities were still more than 32% of GSDP, while Tripura increased from ₹ 1,140 crore to just ₹ 877 crore, but raised a loan weight above 30%. Sikkim, under 2,100 crores, remained marginal throughout the time, although its debt was about 24% of the GSDP.
During the epidemic, borrowings were scattered everywhere. But what happened later was different: some states like Andhra Pradesh, Rajasthan and Telangana continued to increase their borrowings; Cut back to Karnataka, Kerala, and Maharashtra; And some such as Odisha, Uttar Pradesh and Tripura reduced their borrowings even further by revealing very different fiscal strategies.
Welfare contradiction
While some states show surpluses, in fact, they bend heavy on central transfer, off-budget loan, and delay GST compensation. Many of these states are not spending adequately on welfare priorities and therefore any reported surplus can have accounting benefits without developmental benefits. In addition, states such as Punjab wrestling with old loans; Kerala depends on unstable revenue from lottery; Whereas Andhra Pradesh and Uttar Pradesh, through free power and agricultural exemption, postpone their costs in guarantee and special purpose vehicles of vehicles.
Corporate tax cuts, GST cess, and rebranded social expenses have to face the right burden, which leaves a fiscal discretion. With the recent GST resigning and a high fiscal revenue loss, one can know the widespread impact on the fiscal expenditure by the states on their already frugal welfare budget. Nevertheless, within this fragility, welfare schemes have spread in some centralized funding schemes: PM-Kisan Deposit, Ujjwala Cylinder, and Ayushman Bharat Card are broadcast like a political theater token in presenting the ruling dispensation and its leader as India’s welfare population.
This is exactly this stress of a state that spends grandeur during its revenue stress, which frames the current welfare contradiction of India. The nation has built one of the largest welfare states in the world, while maintaining one of the thinnest fiscal bases among the medium-income economies, while depending on the borrowing. The contradiction reflects a nation-state extraordinary promise, with constrained and prohibitive fiscal capacity, where, a spectacle of care is made on the verge of fiscal deficiency.
Dipanshu Mohan is Professor and Dean, op Jindal Global University (JGU)And Visiting Professor, LSE and Research Fellow, Oxford University. Research analysts along with Gitali Malhotra and Aditi Lazarus, CNES, JGU respectively contributed to this article.
