NEW DELHI: Karnataka, Madhya Pradesh, Tamil Nadu, and Punjab have emerged as the biggest providers of subsidies, with such spending accounting for over 13.5% of their total expenditure in 2024-25, according to the latest Comptroller and Auditor General (CAG) report on state finances.
Subsidies Triple Over a Decade
In absolute terms, subsidies offered by states have jumped threefold, with 28 states spending nearly Rs 4.4 lakh crore in 2024-25, compared to Rs 1.4 lakh crore in 2015-16. During this period, their total expenditure rose 2.3 times. As a proportion of revenue spending, subsidies increased from 1.1% to 1.4%, the report noted. Similarly, as a share of state GDP, it rose to 10.2% in FY25, compared to 7.7% in FY16.
Direct Cash Transfers Drive Growth
The numbers indicate that in FY25, as more states, irrespective of political affiliation, handed out direct cash transfers, the share of subsidies in revenue expenditure entered double digits for the first time. However, the CAG report is silent on cash transfers, which have become a popular tool in both assembly and general elections, with parties promising direct fund transfers to women, farmers, and other groups.
Energy and Agriculture Dominate
The federal auditor's data showed that energy—largely power subsidies—accounted for 43% of the subsidy payments in FY25, followed by 30% for agriculture, comprising price support, arrear waivers, fertilizer, and seeds. Rajasthan offered the highest subsidy for power in absolute and percentage terms, followed by Karnataka. Maharashtra, Tamil Nadu, Karnataka, Madhya Pradesh, and Rajasthan together accounted for Rs 2.3 lakh crore, or 54% of state subsidies. Six states spent over 10% on subsidies, while an equal number spent under 1%.
Low Subsidy States in North-East
Six states in the North-East—Arunachal Pradesh, Sikkim, Nagaland, Meghalaya, Tripura, and Assam—spent less than 1% of their expenditure on subsidies. Kerala, Mizoram, Uttarakhand, and Manipur spent under 2%. The report attributed this to smaller consumer bases and limited industrial and irrigation activity, with subsidies directed mainly toward transport, food, and social-sector support rather than energy or agriculture.
