Combined debt of states trebled to Rs 59.6 lakh crore in a decade: CAG report

A landmark report by the Comptroller and Auditor General of India (CAG) has revealed that the combined public debt of all 28 states increased 3.39 times over a decade, soaring from Rs 17.57 lakh crore in 2013-14 to Rs 59.60 lakh crore in 2022-23, as per a recent report in the Indian Express.

The report, which provides a decadal analysis of the states' fiscal health, was released on Friday, 19 September by CAG K. Sanjay Murthy.

It stated that the total public debt — comprising internal debt and loans from the Central government — stood at Rs 59,60,428 crore at the end of the 2022-23 financial year. This figure represents 22.96 per cent of the states' combined Gross State Domestic Product (GSDP) of Rs 2,59,57,705 crore.

“Compared with the total public debt of the states in 2013-14 of Rs 17,57,642 crore, debt in FY 2022-23 has increased by 3.39 times and from 16.66 per cent of GSDP to 22.96 per cent of GSDP,” the report said.

The audit highlighted significant disparities among states. Punjab recorded the highest debt-to-GSDP ratio at 40.35 per cent, followed by Nagaland (37.15 per cent) and West Bengal (33.70 per cent). The most fiscally stable states were Odisha (8.45 per cent), Maharashtra (14.64 per cent) and Gujarat (16.37 per cent).

The report categorised states by debt liability, noting that as on 31 March 2023, eight states had public debt liability of more than 30 per cent of their GSDP; six states had public debt liability of less than 20 per cent of their GSDP and remaining 14 states had public debt liability between 20 to 30 per cent of their respective GSDP in FY 2022-23.

A key concern raised was the diversion of borrowed funds. Contrary to fiscal principles that recommend borrowing only for investment, the report found that 11 states used new debt to finance current expenditures.

“This could be due to part of debt receipts meeting the revenue deficit. In the case of Andhra Pradesh and Punjab, capital expenditure was as low as 17 per cent and 26 per cent of the net borrowings and in the case of Haryana and Himachal Pradesh, about 50 per cent,” the report said.

The analysis attributed a sharp rise in the debt-to-GSDP ratio in 2020-21 to the economic contraction during the Covid-19 pandemic and loans from the Central government for GST compensation shortfalls and capital expenditure.