CAG Report Highlights Fiscal Challenges in State Budget for 2024-25

Shillong, India Aug 29, 2026 ALN: The Comptroller and Auditor General (CAG) of India’s State Finances Audit Report (SFAR) for the government for 2024-25 was tabled in the Legislative Assembly today. This report plays a crucial role in assessing the financial health of the state, providing lawmakers and the public with a detailed analysis of the fiscal situation.

The SFAR offers an in-depth review of the state’s economic performance, budget execution, and financial reporting while highlighting both impressive growth and critical fiscal management challenges. Such audits are essential for ensuring transparency and accountability in government financial practices, and they serve as a guide for policymakers in addressing fiscal issues.

On the positive side, Gross State Domestic Product (GSDP) at current prices rose by 12.03 percent to Rs 59,626 crore in 2024-25, outpacing India’s GDP growth rate of 9.78 percent. This growth is indicative of a robust economic environment, suggesting that various sectors within the state are performing well. However, it is imperative to understand that despite this growth, the state still has a long way to go to catch up to the rest of the country, as its per capita income was a mere Rs 1,57,141 against the national average of Rs 2,05,324, which is more than 26 percent lower. This discrepancy highlights the ongoing socio-economic challenges that the state faces, including poverty and unemployment, which remain pressing issues for the government.

The state remains heavily reliant on funds from the central government, with 76.99 percent of revenue receipts coming through central transfers (Union taxes and grants-in-aid). This reliance raises concerns about the sustainability of the state’s finances, as it indicates a lack of self-generated revenue sources. A heavy dependence on central funds can also limit the state’s autonomy in decision-making and fiscal policy formulation, making it vulnerable to changes in central government policies.

Capital expenditure significantly increased to Rs 5,245.98 crore, indicating investment in infrastructure and development. This investment is crucial for fostering long-term economic growth, as improved infrastructure can enhance productivity and attract further investments. However, the challenge lies in ensuring that these funds are utilized effectively and lead to tangible outcomes that benefit the population.

Despite the increase in capital expenditure, the government is spending significantly more than it earns and is also borrowing heavily. This trend raises alarms about fiscal sustainability. The state achieved a post-audit revenue deficit of Rs 52.69 crore, falling short of the revenue surplus target set under the Fiscal Responsibility and Budget Management Act 2006 as amended. The discrepancy between projected and actual revenue reflects challenges in revenue collection and financial management, which need to be addressed to avoid further fiscal deterioration.

Indeed, before the audit, the Finance Department had shown a revenue surplus of Rs 72.71 crore for 2024-25. However, the audit found that the state government had “misclassified” expenditure of Rs 125.40 crore, which resulted in an overstatement of revenue surplus. This misclassification raises concerns about the accuracy of financial reporting and the potential for mismanagement of public funds. Accurate financial reporting is essential for maintaining public trust and ensuring that resources are allocated efficiently.

The fiscal deficit widened to Rs 5,184.01 crore, which, as a percentage of GSDP, grew sharply to 8.69 percent, thereby not achieving the target of 3.50 percent set under the MFRBM Act. A widening fiscal deficit can lead to increased borrowing costs and may necessitate austerity measures in the future, which could adversely impact public services and development programs.

Total liabilities stood at 44.61 percent of GSDP, breaching the statutory ceiling of 28.00 percent. This alarming statistic underscores the urgent need for fiscal reform and better debt management strategies. The liabilities include a 50-year interest-free loan from the central government under the Scheme for Assistance to States for Capital Investment (SASCI), which, while beneficial, also adds to the overall debt burden if not managed properly.

The CAG also drew attention to the state’s performance in budget execution and financial reporting. The report stated that the state’s budget estimates were “not very realistic,” with notable deviations in both revenue and capital outlays. This lack of realism in budget estimates can lead to significant financial imbalances and complicate long-term planning for the state. Accurate forecasting is crucial for effective governance, as it allows for informed decision-making and resource allocation.

As of March 31, 2025, expenditure to the extent of Rs 20,378.78 crore was yet to be regularised. In addition, high pending utilisation certificates of Rs 5,428.54 crore and unadjusted AC (abstract contingent) bills of Rs 20.39 crore “point to significant gaps in financial control.” The presence of such gaps in financial control not only complicates the financial landscape but also raises concerns about the potential for corruption and mismanagement of public funds. AC bills are funds drawn by Drawing and Disbursing Officers (DDOs) for urgent or contingent expenditures before receiving final approval or vouchers. The high volume of unadjusted AC bills indicates a lack of accountability and oversight in financial operations.

In conclusion, while the CAG report highlights some positive trends in the state’s economic growth, it also underscores significant fiscal challenges that need to be addressed. The reliance on central funds, widening fiscal deficit, and mismanagement of expenditures are critical issues that require immediate attention from state officials. Moving forward, it will be essential for the government to implement robust financial management practices, enhance revenue generation efforts, and ensure that capital investments yield positive outcomes for the state’s economy and its citizens.