INTEGRATED MAINS AND PRELIMS MENTORSHIP (IMPM) 2025 Daily KEY
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Comptroller and Auditor General of India (CAG) and Strategic Mutual Defense Agreement (SMDA), Representation of the People Act, 1950 (RP Act, 1950), Indus Waters Treaty (IWT), Foreign Portfolio Investment (FPI) for the UPSC Exam? Why are topics like Illegal migrants and India-EU FTA important for both preliminary and main exams? Discover more insights in the UPSC Exam Notes for September 23, 2024
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For Preliminary Examination: Current events of national and international Significance
For Mains Examination: GS II - Indian Polity
Context:
The public debt of all 28 states combined trebled in 10 years — from Rs 17.57 lakh crore in 2013-14 to Rs 59.60 lakh crore in 2022-23 — according to a first-of-its-kind report by the Comptroller and Auditor General of India (CAG) that provides a decadal analysis on fiscal health of states.
Read about:
Comptroller and Auditor General of India (CAG)
What is the role and function of the CAG?
Key takeaways
- Ways and Means Advances (WMA) serve as a temporary borrowing mechanism provided by the Reserve Bank of India (RBI) to both the Union and state governments. These funds are intended only to manage short-term mismatches between revenue inflows and expenditure needs, and not as a regular financing tool.
- Under Section 17(5) of the RBI Act, 1934, the central bank is permitted to extend such advances to governments, provided the repayment is made within three months of disbursement.
- The Fiscal Health Index for 2022–23, covering 18 major states, evaluated fiscal management on five parameters: expenditure quality, revenue mobilisation, fiscal discipline, debt levels, and debt sustainability.
- Odisha topped the rankings, followed by Chhattisgarh, Goa, Jharkhand, and Gujarat. The strong performance of Odisha, Chhattisgarh, and Jharkhand was attributed largely to mining-related revenues, whereas states like Punjab, Andhra Pradesh, and West Bengal performed poorly, particularly in revenue mobilisation and fiscal discipline. The findings were presented by CAG K. Sanjay Murthy during the State Finance Secretaries’ Conference.
- According to the report, the combined public debt of 28 states stood at ₹59.6 lakh crore at the close of FY 2022–23. This amounted to 22.96% of their aggregate Gross State Domestic Product (GSDP) of ₹259.57 lakh crore.
- Punjab recorded the highest debt-to-GSDP ratio at 40.35%, followed by Nagaland (37.15%) and West Bengal (33.70%). At the other end, Odisha (8.45%), Maharashtra (14.64%), and Gujarat (16.37%) had the lowest ratios. Collectively, states’ debt in 2022–23 equalled 22.17% of India’s GDP, which was ₹268.90 lakh crore.
- State public debt consists of borrowings through market securities, treasury bills, bonds, loans from commercial banks (including SBI), WMAs from the RBI, as well as funding from institutions like LIC and NABARD.
- The report reiterated the “golden rule” of public borrowing—that loans should be used for investment and asset creation, not routine expenditure. Yet, 11 states diverted borrowed resources toward meeting revenue deficits.
- For instance, Andhra Pradesh and Punjab allocated only 17% and 26% of their net borrowings, respectively, to capital spending, while in Haryana and Himachal Pradesh the figure was about 50%
Follow Up Question
Mains
1.Examine the evolving pattern of Centre-State financial relations in the context of planned development in India. How far have the recent reforms impacted the fiscal federalism in India? (UPSC CSE 2025)
Prelims
1.Consider the following statements : (UPSC CSE 2018)
1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Governments.
2. The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments.
3. As per the Constit