Himachal’s fiscal stress deepens as debt tops Rs 1 lakh crore, development spending squeezed: CAG

New Delhi: Himachal Pradesh’s finances came under mounting pressure in 2024-25 as the state breached its fiscal-deficit and revenue-deficit targets, accumulated liabilities of more than Rs 1 lakh crore and spent the bulk of its revenue on salaries, pensions and subsidies, according to a Comptroller and Auditor General (CAG) report tabled in the Assembly.

The report, presented by Chief Minister Sukhvinder Singh Sukhu, showed that the state’s fiscal deficit widened to Rs 12,611.05 crore, equivalent to 5.44 percent of gross state domestic product (GSDP). The revenue deficit stood at Rs 6,804.61 crore, or 2.94 percent of GSDP.

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Both indicators exceeded the limits prescribed under the Fiscal Responsibility and Budget Management framework, highlighting the widening gap between the government’s income and expenditure.

The CAG said as much as 86 percent of the state’s revenue receipts was absorbed by salaries, pensions, gratuities and subsidies. Salaries and pensions alone accounted for 70 percent, leaving only about 14 percent for infrastructure creation, capital investment and other expenditure. The spending pattern points to a deep structural imbalance: while committed expenditure continues to rise, the government has little fiscal room to fund development without borrowing further.

The auditor also questioned the growing burden of electricity subsidies and debt-relief measures, which contributed to the increase in subsidy expenditure.

Himachal Pradesh’s total liabilities reached Rs 1,04,410.57 crore by March 31, 2025. Internal liabilities rose 9.78 percent during the year to Rs 67,448.38 crore.

The CAG warned that the combination of rising debt and limited capital expenditure could undermine the state’s long-term financial stability unless the government strengthens revenue mobilisation, restrains expenditure and undertakes structural reforms.

The strain on state finances persisted despite higher receipts from some sources. Himachal recorded a 4.34 percent increase in its share of GST and central taxes, while non-tax revenue rose 22.40 percent. However, the state continued to depend heavily on grants from the Centre.

The state economy grew 9.20 percent during 2024-25, but Himachal’s share in India’s GDP stood at just 0.70 percent. The CAG also noted that the state’s contribution to national GDP had declined over the preceding five years.

Beyond the broader fiscal deterioration, the report identified serious weaknesses in budgetary control. Government expenditure exceeded the amount authorised by the Legislative Assembly by Rs 3,102.88 crore across seven grants and four appropriations.

Of this, excess expenditure of Rs 2,552.63 crore was recorded under the Finance Department alone. Separately, Rs 438.66 crore was spent in 16 instances across nine grants without any budgetary provision.

The report also found significant gaps between budget allocations and actual spending. Although Rs 673.11 crore was provided for 14 schemes, none of the money was utilised. Supplementary provisions totalling Rs 1,575.44 crore across 13 instances were subsequently found to be unnecessary, raising questions over the credibility of the state’s budgeting process.

The CAG further flagged the handling of collections such as the milk cess, environment cess and Building and Other Construction Workers’ Welfare Cess. These funds were kept outside the government account, which the auditor said violated Article 266 of the Constitution.

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Delays by local bodies, departmental undertakings and autonomous organisations in submitting utilisation certificates were also highlighted, weakening oversight over whether public funds had been used for their intended purposes.

Taken together, the findings indicate that Himachal Pradesh’s fiscal challenge is no longer confined to high borrowing. The state is also grappling with rigid committed expenditure, weak budget planning, limited capital investment and deficiencies in financial reporting and control.

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