CAG Report: Four States Spent Over 13% of Expenditure on Subsidies in 2024-25
A recently released report by the Comptroller and Auditor General (CAG) of India has identified Karnataka, Madhya Pradesh, Tamil Nadu, and Punjab as the states with the highest subsidy spending relative to their total expenditure in the financial year 2024-25. According to the report, subsidies in these states accounted for more than 13.5% of their overall spending, marking a significant rise over the past decade.
The CAG's analysis of state finances reveals that the combined subsidy outlay of 28 states surged threefold from Rs. 1.4 lakh crore in 2015-16 to nearly Rs. 4.4 lakh crore in 2024-25. During the same period, total expenditure by these states grew 2.3 times. As a proportion of revenue spending, subsidies increased from 1.1% to 1.4%, while as a share of state gross domestic product (GSDP), it rose from 7.7% in 2015-16 to 10.2% in 2024-25.
The report highlights that the share of subsidies in revenue expenditure crossed the 10% threshold for the first time in 2024-25, driven by increased direct cash transfers across states, irrespective of political leanings. However, the CAG report does not delve into the specifics of cash transfer schemes, which have become prominent electoral promises, including direct fund transfers to women, farmers, and other groups.
Breaking down the subsidy composition, energy subsidies—primarily for power—constituted 43% of the total subsidy payments in 2024-25. Agricultural subsidies, which include price support, arrear waivers, and support for fertilisers and seeds, accounted for 30%. Rajasthan led in power subsidies both in absolute terms and as a percentage of its expenditure, closely followed by Karnataka. Collectively, Maharashtra, Tamil Nadu, Karnataka, Madhya Pradesh, and Rajasthan were responsible for Rs. 2.3 lakh crore, or 54% of all state subsidies.
The report further notes wide disparities among states. Six states spent more than 10% of their total expenditure on subsidies, while another six spent less than 1%. The northeastern states of Arunachal Pradesh, Sikkim, Nagaland, Meghalaya, Tripura, and Assam fell below 1%, attributed to smaller consumer bases and limited industrial and irrigation activity. Kerala, Mizoram, Uttarakhand, and Manipur spent under 2%, with subsidies largely directed towards transport, food, and social sectors rather than energy or agriculture.
The CAG’s findings come at a time when state finances are under increasing scrutiny, particularly regarding the sustainability of high subsidy burdens and their opportunity costs for development and capital expenditure. The report does not provide recommendations but presents a factual overview of the fiscal landscape.
