New Delhi [India], January 29 : The number of Indian states reporting a revenue surplus has declined sharply over the years, falling from 19 in FY19 to just 11 in FY25 (Provisional Accounts), highlighting rising fiscal stress at the state level, according to the Economic Survey.
The Survey noted that between FY19 and FY25PA, as many as 18 states witnessed a deterioration in their revenue balances. Of these, 10 states slipped into a revenue deficit from a revenue surplus position, while five states saw a further worsening of their existing revenue deficits.
Three states, though still in revenue surplus, also recorded a deterioration in their fiscal position during this period.
It stated "states in revenue surplus reduced from 19 in FY19 to 11 in FY25(PA), leading to an overall increase in revenue deficit of states as a collective".
As a result of this broad-based deterioration, the collective revenue deficit of states increased significantly to 0.7 per cent of GDP in FY25PA, compared to just 0.1 per cent of GDP in FY19.
The Economic Survey pointed out that this reflects growing pressure on state finances over the past few years.
The stress intensified further in the recent period. Between FY24 and FY25PA, the revenue deficit across all states increased by 40 basis points. The Survey identified lagging revenue growth relative to nominal GDP growth as a key factor behind this renewed fiscal stress.
This was compounded by higher expenditure commitments, including discretionary unconditional cash transfers undertaken by several states.
Despite these challenges, states continue to rely heavily on their own tax revenues. The Economic Survey highlighted that states' own tax sources registered a compound annual growth rate (CAGR) of 12.6 per cent in the post-pandemic period.
As a result, the share of states' owns tax revenue in total revenue receipts increased from 46 per cent in FY22 to around 50 per cent in FY25 (PA).
The second-largest source of revenue for states remained their share in central taxes, which accounted for around 32 per cent of total revenue receipts. This was followed by grants-in-aid from the Centre and non-tax revenues.
However, the momentum in revenue collection appears to be moderating in the current fiscal year. As per the Economic Survey, during the first eight months of the ongoing financial year (as on end-November 2025), the combined revenue receipts of states grew at a rate of 6.6 per cent.
This growth was lower compared to the year-on-year growth recorded during the same period in the previous year.
The Survey's findings highlight the need for careful fiscal management by states, especially in the context of slowing revenue growth and rising expenditure pressures, as maintaining revenue balance remains crucial for long-term fiscal sustainability.
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