CAG Report on State Finances 2023-24
In News
What Happened
Why It Matters
Background
History & Context
What Changed
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Fiscal Deficit Compliance: BEFORE, states generally aligned closer to the mandated FRBM targets during stable economic periods. NOW, the CAG report shows that 18 states have breached the 3 percent fiscal deficit limit, reflecting deteriorating fiscal discipline.
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Expenditure Flexibility: BEFORE, states had a higher proportion of flexible revenue available for developmental and capital spending. NOW, nearly 60 percent of revenue expenditure is locked into committed costs (salaries, pensions, interest), severely limiting discretionary spending.
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Quality of Borrowing: BEFORE, state borrowing was mostly intended to follow the golden rule, funding asset-creating capital expenditure. NOW, states are increasingly using borrowed funds to finance routine revenue deficits, directly violating this principle.
Prelims Angle
NCERT Connection
Practice Questions
Q1
Correct Statement(s)Which of the following statements is/are correct regarding the fiscal management of states in India? 1. Article 293 of the Constitution allows states to borrow directly from foreign governments without the Centre's consent. 2. The 'golden rule of borrowing' implies that government debt should be used exclusively to finance current expenditure like salaries and pensions.