States’ expenses on salary, pension, interest payment rise 2.5 times in 10 yrs: CAG

New Delhi: The Comptroller and Auditor General (CAG) of India has reported a steep increase in the committed expenditure of states on salaries, pensions, and interest payments over the past decade. According to the State Finances 2022-23 publication, these expenses rose 2.49 times to reach Rs 15,63,649 crore in the financial year 2022-23, compared with Rs 6,26,849 crore in 2013-14.

Committed expenditure, which includes salaries, pensions, and interest obligations, accounts for a significant portion of state revenue expenditure and leaves limited fiscal room for other developmental spending. The report highlighted that a large share of states’ revenue expenditure remains tied up in these mandatory outflows.

During the 10-year period under review, revenue expenditure consistently formed 80 to 87 per cent of total spending by the states. As a share of combined Gross State Domestic Product (GSDP), this stood at 13–15 per cent. In FY 2022-23 alone, revenue expenditure reached 84.73 per cent of total expenditure and was 13.85 per cent of the combined GSDP.

Out of the total revenue expenditure of Rs 35,95,736 crore in 2022-23, committed expenditure stood at Rs 15,63,649 crore. Subsidies accounted for Rs 3,09,625 crore, while grants-in-aid amounted to Rs 11,26,486 crore. Together, these three categories added up to Rs 29,99,760 crore, or more than 83 per cent of revenue expenditure across all 28 states.

The report noted, “Over the period 2013-14 to 2022-23, revenue expenditure increased by 2.66 times, committed expenditure increased by 2.49 times, and subsidy increased by 3.21 times.”

In terms of structure, salaries remained the largest component of committed expenditure, followed by pension payouts and interest payments in most states. Nineteen states followed this pattern in 2022-23. However, in nine states — Andhra Pradesh, Gujarat, Haryana, Karnataka, Punjab, Rajasthan, Tamil Nadu, Telangana, and West Bengal — interest payments exceeded pension expenditure, pointing to higher debt servicing requirements. The report observed that for most of the earlier nine-year period (2013-14 to 2021-22), interest payments had been the second-largest component after salaries.

Subsidy expenditure also witnessed a notable rise, climbing from Rs 96,479 crore in 2013-14 to Rs 3,09,625 crore in 2022-23.

On the fiscal targets front, 17 states had projected revenue surpluses in 2022-23, five aimed for deficits, and six expected to balance their revenue accounts. However, five states — Assam, Bihar, Himachal Pradesh, Meghalaya, and Rajasthan — that had set revenue surplus targets slipped into deficits. Only 12 states successfully achieved surpluses.

Among the five that budgeted for deficits, Karnataka turned its position into a surplus, while Maharashtra kept its deficit within the targeted 1.42 per cent of GSDP. The remaining three — Andhra Pradesh, Haryana, and Punjab — exceeded their deficit targets.

The report further pointed out that of the 12 states in revenue deficit during 2022-23, only nine — Andhra Pradesh, Assam, Himachal Pradesh, Kerala, Meghalaya, Punjab, Rajasthan, Tamil Nadu, and West Bengal — received Finance Commission revenue deficit grants.