Seven states’ revenue deficits higher than reported, CAG finds; Bihar up 7x, Chhattisgarh doubles

The Comptroller and Auditor General of India has found seven states with off-budget borrowing, incorrectly classified expenditure, untransferred cesses and other unpaid obligations to make their budget look healthier than reality. The real financial position of these states was worse than what the official numbers showed.

The report found that Maharashtra and West Bengal seem to have managed to keep their fiscal deficits within their respective limits in 2024-25. Meanwhile, the revenue deficit of Bihar increased nearly sevenfold after audit adjustments, and Chhattisgarh’s doubled. In addition, Gujarat retained a revenue surplus; however, it was almost Rs 12,000 crore smaller than its originally indicated Finance Accounts.

Fiscal deficit of seven states

Maharashtra was found to have a fiscal deficit of Rs 1,24,208.74 crore, marking 2.74 per cent of its gross state domestic product, or GSDP. The Maharashtra report of the CAG increased the deficit by Rs 20,717.72 crore to Rs 1,44,926.46 crore, showing 3.20 per cent of GSDP. The biggest adjustment rose from Rs 18,440 crore borrowed during 2024-25 through the Maharashtra State Road Development Corporation. The loans carried a state guarantee, and their principal and interest were supposed to be met through budgetary provisions.

Bihar's Finance Accounts showed a revenue deficit of just Rs 357.38 crore, but the CAG recalculated this figure to Rs 2,500.81 crore in its Bihar report. This revision stemmed from revenue expenditure wrongly booked as capital expenditure, along with shortfalls or non-transfers of funds to the National Pension System, Single Nodal Agency accounts, and funds meant for construction workers, road safety, and mineral exploration.

As a result, Bihar's revenue deficit rose from 0.04 per cent to 0.25 per cent of GSDP after the audit. Its fiscal deficit, already exceeding the prescribed target, climbed further too, from 4.16 per cent per the Finance Accounts to 4.37 per cent on a post-audit basis.

Chhattisgarh had reported a revenue deficit of Rs 5,099.47 crore, which the CAG revised upward to Rs 10,245.83 crore. This change was mainly driven by Rs 1,234.79 crore in revenue expenditure misclassified as capital expenditure, plus Rs 3,912.32 crore in off-budget borrowing repayments that were recorded as capital spending. Gujarat's Finance Accounts had shown a revenue surplus of Rs 18,942.94 crore, but CAG adjustments cut this down to Rs 7,013.97 crore, a drop of Rs 11,928.97 crore, or nearly 63 per cent.

West Bengal had reported a fiscal deficit of Rs 61,924 crore, or 3.41 per cent of GSDP, staying within its 3.50 percent limit. However, once untransferred cess, the non-recoupment of the Contingency Fund, and other adjustments were factored in, the CAG's post-audit figure rose to Rs 63,739.23 crore, or 3.51 per cent of GSDP.

On the other hand, the CAG raised Karnataka's revenue deficit from Rs 20,834 crore to Rs 22,843 crore, citing misclassified capital expenditure and unpaid interest. Kerala's fiscal deficit rose from Rs 48,248.14 crore (3.86 per cent of GSDP) to Rs 48,510.20 crore (3.89 per cent). The audit flagged Rs 39,230.33 crore in off-budget borrowings via KIIFB and KSSPL, excluded from Kerala's reported Rs 4.46 lakh crore liabilities (35.71 per cent of GSDP); including them would push the ratio to 38.86 per cent.