SFAR Meghalaya 2024-25
State Finances Audit Report
Government of Meghalaya
This chapter provides a snapshot of Meghalaya’s finances for 2024-25, covering demographics, economic indicators, and the State’s fiscal structure. It analyses trends in revenue and expenditure, debt levels, and fiscal deficits, highlighting persistent imbalances and reliance on borrowings. The chapter flags issues like high committed expenditure, low returns on investments, etc.
Meghalaya, a predominantly agrarian State in north-east India, covers 22,429 sq. km. and comprises 12 districts and 6,459 villages. As per 2011 Census, its population stood at 29.67 lakh (0.20 per cent of India’s total), with a density of 132 persons per sq. km. Further, as per the Report of the Technical Group on Population Projections on ‘Population Projection for India and States 2011 – 2036’, submitted by National Commission on Population, Ministry of Health and Family Welfare, Government of India in July 2020, the population of the State is set to reach 34.10 lakhs (0.24 per cent of India’s population) in 2025 compared with the country’s population of 141.33 crore with a density of 152 persons per square kilometer. This section provides an overview of the State’s demography, GSDP, and per capita income of the State.
The State's demographic details vis-à-vis national average are presented in the Table 1.1 below.
Gross State Domestic Product (GSDP) and per capita income are important indicators of the State's economy as discussed in succeeding paragraphs.
Gross Domestic Product (GDP) refers to the total value of goods and services produced within a country, while GSDP measures the same at the State level, and both reflect economic development and overall progress. Trends of GSDP and GDP is given in Table 1.2. Year on year (YoY) growth of GSDP and GDP as well as GSDP contribution in GDP is given in Chart 1.1 and Per Capital Income (PCI) of the country and Per Capita Income (PCI) of the State is depicted in Chart 1.2.
Table 1.2 shows that the GSDP of the State grew from ₹ 53,223 crore in 2023-34 to ₹ 59,626 crore in 2024-25 registering growth rate of 12.03 per cent which was higher than that of the GDP growth rate (9.78 per cent).
Chart 1.1 highlights that the GSDP growth of the State outpaced the GDP growth during the five-year period except in the Covid-19 year 2020-21 when both GSDP and GDP declined. The low base effect from the pandemic year 2020-21 resulted in strong growth in both nominal GDP and GSDP during 2021-22, followed by slower growth in 2022-23. Despite this deceleration, Meghalaya's nominal GSDP increased higher than the national nominal GDP in 2022-23 and maintained relatively stable and higher growth throughout the period from 2020- 21 to 2024-25 during which Compounded Annual Growth Rate(CAGR) of nominal GDP was 13.60 per cent while that of Meghalaya's GSDP recorded 15.27 per cent. The GSDP- to-GDP ratio of the State also remained largely stable. Overall, the state's economy exhibited steady momentum and quicker recovery from slowdowns than the national GDP.
As seen from Chart 1.2, the State's per capital income consistently remained below the national average. During the five-year period from 2020-21 to 2024-25, the State's per capita income grew by 73.16 per cent, outpacing the national per capita income growth of
61.36 per cent. However, the gap in terms of absolute income widened from ₹ 36,493 in 2020-21 to ₹ 48,183 in 2024-25. The State's relatively faster per capital income growth exhibited a favourable trend, indicating potential convergence with the national per capita income level over time.
The sectoral contribution by various sector during 2024-25 and sectoral growth in GSDP during the last five years are depicted in Chart 1.3 and Chart 1.4 respectively.
Chart 1.5 shows the composition of each sector during FY 2024-25, in terms of its major contributing segments.
The tertiary sector remained the largest contributor throughout, while the secondary sector showed post-pandemic recovery and the primary sector maintained a relatively stable share.
Charts 1.3, 1.4 and 1.5 indicates that tertiary sector was the dominant force contributing 58 per cent of the GSDP, followed by the Primary Sector at 25 per cent and the Secondary Sector at 17 per cent. Detailed analysis of sub-sectors shows that 92 per cent of Primary Sector was contributed by agriculture, the Secondary Sector was led by manufacturing (53 per cent) and the diverse tertiary sector was anchored by trade (35 per cent) and public administration (19 per cent). Sectoral growth trends indicate that the sectors that witnessed a sharp rebound in 2021-22, reversing the decline observed in 2020-21, are the secondary (from -9.31 per cent in 2020-21 to 30.52 per cent in 2021-22) and tertiary sector (from -7.21 per cent in 2020-21 to 15.26 per cent in 2021-22). The primary sector, however, continued its growth trajectory, registering robust growth of 13.56 per cent in 2020-21 and 17.06 per cent in 2021-22.
Table 1.3 shows the details of actual financial results of State Government of Meghalaya for the years 2023-24 and 2024-25 vis-a-vis Budget Estimates (BE), Revised Estimates (RE) and GSDP for the year 2024-25.
The details of State Government Finances for the 10-year period from 2015-16 to 2024-25 is given in Appendix 1.1.
Table 1.3 highlights that Revenue Receipts of the State decreased by 4.58 per cent in 2024-25 as compared to 2023-24 while the Revenue Expenditure increased by 3.00 per cent resulting in revenue surplus of ₹ 72.71 crore which is overstated as discussed in subsequent paragraphs. However, the Capital Receipts increased by 63.90 per cent while Capital Expenditure increased by 15.82 per cent.
Comparison of components of the sources and application of funds of the State during the current year is given in Chart 1.6.
Appendix 1.2 provides details of receipts and disbursements and the overall fiscal position of the State during current year as well as previous year.
Government accounts capture the financial liabilities of the Government and the assets created out of the expenditure incurred. Appendix 1.3 gives an abstract of such liabilities and assets, as on 31 March 2025, compared with the corresponding position of the previous year. The liabilities consist mainly of internal borrowings, loans and advances from GoI, receipts from the Public Account and Reserve Funds. Assets comprise mainly of the Capital Expenditure, and loans and advances, given by the State Government and cash balances. A summarised position of assets and liabilities, for the financial years 2023-24 and 2024-25, is given in Table 1.4.
All revenues received by the State Government, all loans raised by the State Government, ways and means advances extended by the Reserve Bank of India and all money received by the State Government in repayment of loans forms part of the Consolidated fund of the State.
Trends and growth of revenue receipts with respect to Gross State Domestic Product (GSDP) over the five-year period (2020-25) are shown in Table 1.5.
During 2024-25, Revenue Receipts stood at ₹ 17,153.91 crore which was decrease of 4.58 per cent over the previous year. The contraction was mainly due to sharp decrease in Grants-In-Aid from the Government of India by 40.15 per cent compared to 2023-24 despite increase in the State's own revenue by 5.54 per cent and rise in the State's share in Union taxes and duties by 13.93 per cent.
Over the five-year period 2020-25, Revenue Receipts of the State grew by 60.57 per cent. During this period, annual increase in State's Own Tax Revenue (SOTR) fell short of annual GSDP growth rate except in 2023-24 as it grew slower than GSDP growth rate except in 2023- 24. This indicates that the State's own tax revenue mobilisation did not keep pace with economic growth in general. This trend of low buoyancy ratio suggests structural weaknesses in revenue mobilisation and highlights the need to broaden tax base, strengthen compliance mechanisms and enhance collection efficiency, to strengthen revenue mobilisation and reduce dependence on external transfers for sustainable fiscal management.
Revenue Receipts as percentage of GSDP and contribution from various sources in revenue receipts is given in Chart 1.7 and Chart 1.8.
Chart 1.7 shows that the revenue receipts as share of GSDP declined from 31.63 per cent in 2020-21 to 28.77 per cent in 2024-25. Chart 1.8 indictaes that, as share of Revenue Receipts, Central transfers remained in the range of 75.70 per cent - 80.21 per cent while the State's Own Revenue lied between 19.79 per cent and 24.30 per cent.
Own Tax Revenue is the revenue collected by the State Government through taxes it is empowered to levy under the Constitution. Actuals for FY 2023-24, Budget Estimate (BE), Revised Estimate (RE), and Actuals of Own Tax Revenue for the FY 2024-25 are given in Table 1.6.
Trends of own tax revenue and its components during the period 2020-21 to 2024-25 are shown in Chart 1.10 and Chart 1.11 respectively.
During 2024-25, the State's Own Tax Revenue stood at ₹ 3,473.06 crore which was 7.98 per cent higher than the previous year (₹ 3,216.53 crore). This was 85.94 per cent of the Budget Estimate (₹ 4,041.27 crore). Also, its share in GSDP declined marginally from 6.04 per cent in 2023-24 to 5.82 per cent in 2024-25.
Within the State's Own Tax Revenue, SGST (₹ 1,807.92 crore) remained the dominant source, contributing 52 per cent. However, its growth (4.92 per cent) was slower compared to the previous year (16.66 per cent). Taxes on Sales, Trades, etc. increased by 13.90 per cent, while State Excise grew by 10.36 per cent over the previous year. Vehicle tax recorded 1.19 per cent increase over the last year and Stamp Duty and Registration Fees rose by 37.87 per cent. However, land revenue fell sharply by 49.04 per cent.
Non-Tax Revenue of a State refers to the rent, fees, royalties and other receipts, of the State Government from sources other than taxes. Actuals for FY 2023-24, Budget Estimate (BE), Revised Estimate (RE), and Actuals of Non-Tax Revenue for the FY 2024-25 are given in Table 1.7.
Against the Budget Estimate (BE) of ₹ 746.58 crore for non-tax revenue receipts during the year 2024-25, actual receipts stood at ₹ 474.08 crore i.e., 63.50 per cent of BE. This was mainly due to less realisation of BE for royalty and other receipts under Non-ferrous Mining and Metallurgy (less by ₹ 226.03 crore) and Forestry and Wildlife (less by ₹ 32.70 crore).
As compared to the previous year, the actual non-tax revenue receipts show decrease of ₹ 49.17 crore (9.40 per cent). This was mainly due to decrease of ₹ 48.85 crore in royalty and other receipts under Non-ferrous Mining and Metallurgy, ₹ 10.70 crore in hire charges and other receipts under Public Works and ₹ 5.32 crore in interest receipts despite increase of ₹ 15.22 crore under other non-tax revenue receipts and 2.88 crore under Forests and Wildlife.
Trends of non-tax revenue and its components during the period 2020-21 to 2024-25 are shown in Chart 1.12 and Chart 1.13 respectively.
Chart 1.12 shows that non-tax revenue receipts as the share of GSDP consistently decreased during the five-year period from 1.55 per cent in 2020-21 to 0.80 per cent in 2024-25. This suggests that non-tax revenue receipts grew at a slower pace than GSDP of the state.
During the five-year period from 2020-21 to 2024-25, the total non-tax revenue receipts remained in the range of ₹ 456.61 crore - ₹ 524.58 crore. Out of this, receipts mainly came from royalties on minerals and other receipts under Non-ferrous Mining and Metallurgy (45.71 per cent - 61.69 per cent) and Forestry and Wildlife (19.52 per cent - 28.42 per cent).
During the Exit Conference, the State Government stated that Non-Tax Revenue (NTR) in Meghalaya is largely derived from limestone and coal. However, during 2024-25, a court judgement stayed export of limestone, and this was the primary reason for the reduction of non-tax revenue. The State Government added that the court stay has been vacated now and the export has been resumed. However, volatile situations in the export destination of limestone restricted export and hence there was less Non-Tax Revenue from limestone in the year 2025-26 also.
Trends in the components of State's share in Union taxes and duties are shown in Table 1.8.
Percentage of total State's share in Union taxes and duties to GSDP is given in Chart 1.14
Table 1.8 shows that the State's share in Union Taxes and Duties during 2024-25 increased to ₹ 9,870.40 crore from ₹ 8,663.22 crore in 2023-24 registering a growth of 13.91 per cent (₹ 1,207.18 crore). The increase was mainly due to increase in Taxes on Income other than Corporation Tax (₹ 568.78 crore), CGST (₹ 253.61 crore) and Corporation Tax (₹ 200.50 crore) and Customs (₹ 198.59 crore). The State's share in Union taxes and duties constituted 57.54 per cent of the total Revenue Receipts of the State in 2024-25. Over the five- year period 2020-25, the State's share increased from ₹ 4,551.63 crore to ₹ 9,870.40 crore. As share of Revenue Receipts of the state, it was in the range of 42.61 per cent - 57.54 per cent. As seen in Chart 1.14, the State's share as percentage of GSDP remained stable within the range 13.48 per cent - 16.55 per cent indicating close link between increase in the State's share and the growth in the GSDP of the State.
Trend of Grants-in-aid (GIA) from GoI and its components are shown in Table 1.9.
Table 1.9 shows that the state received ₹ 3,336.37 crore as Grants-in-Aid (GIA) from the Government of India in the current year 2024-25. This was 40.15 per cent (₹ 2,238.49 crore) lower than the previous year. In fact, this was the lowest in the last five-year period. Out of the GIA for the year, 90.10 per cent was received for Centrally Sponsored Schemes followed by Finance Commission Grants (6.88 per cent) and other transfers and grants (3.37 per cent). As share of total Revenue Receipts, GIA stood at 19.45 per cent for the year.
Percentage of Grant-in-aid from Government of India to GSDP is given in Chart 1.15
Chart 1.15 shows that Grants-in-Aid (GIA) from the Government of India to the State constituted between 5.60 per cent and 12.10 per cent during the five-year period from 2020-21 to 2024-25, with the lowest share recorded in 2024-25. This was mainly because the Post-Devolution Revenue Deficit grant under the Finance Commission Grants of the state in 2024-25 was the lowest during this period.
During the Exit Conference, the State Government stated that the primary reason for reduction was decrease in the funds for Centrally Sponsored Schemes mainly due to substantial funds received under Pradhan Mantri Awas Yojana (PMAY) in 2023-24. The State Government added that migration to SNA SPARSH also contributed to the reduction.
Out of the Grants of ₹ 3,006.04 crore for Centrally Sponsored Schemes during 2024-25, major allocations were made to the schemes shown in Table 1.10.
Table 1.10 shows that the largest grants among the Centrally Sponsored Schemes during 2024-25 were received under Additional Central Assistance for Externally Aided Project (₹ 679.43 crore) followed by MGNREGA Scheme (₹ 404.34 crore) and Samagra Shiksha Scheme (₹ 362.83 crore).
The Fifteenth Finance Commission (15th FC) grants were provided to the States for local bodies and State Disaster Response Fund (SDRF), State Disaster Mitigation Fund (SDMF) and health sector grants. Details of grants provided by GoI are given in Table 1.11.
As depicted in Table 1.11, during the year 2024-25, against the total amount of ₹ 226 crore recommended for the year as grants-in-aid by the 15th Finance Commission (FC) for the Rural Local Bodies (RLBs) and Urban Local Bodies (ULBs), the State received ₹ 60 crore (26.55 per cent) which was fully released by the State (₹ 27 crore to the Autonomous District Councils and ₹ 33 crore to the Municipal Boards) during the year. Further, the 15th FC also recommended a total of ₹ 84 crore for State Disaster Response Fund (SDRF) and State Disaster Mitigation Fund (SDMF) components of State Disaster Risk Management Fund (SDRMF) comprising central share of ₹ 60.80 crore for SDRF and ₹ 15.20 crore for SDMF and a state share of ₹ 6.40 crore for SDRF and ₹ 1.60 crore for SDMF. As compared to this, the Government of India (GoI) released ₹ 59.60 crore as the central share for SDRF, which was transferred by the State to the SDRF in the Public Accounts along with the state's share of ₹ 6.40 crore.
Capital receipts comprise miscellaneous capital receipts such as proceeds from disinvestments, recoveries of loans and advances, debt receipts from internal sources (market loans, borrowings from financial institutions/commercial banks) and loans and advances from GoI.
Trends of capital receipts and its components from 2020-21 to 2024-25 are shown in Table 1.12.
Capital Receipts as percentage of GSDP is depicted in Chart 1.16.
Table 1.12 shows that the State's Capital Receipts in 2024-25 increased significantly by 71.60 per cent to ₹ 5,831 crore from ₹ 3,398 crore in 2023-24. This rise was primarily driven by higher public debt receipts (including net WMA & SDF of ₹ 1,227.49 crore) (₹ 5,809 crore), which accounted for 99.62 per cent of the total capital receipts. Within this, loans and advances from GoI increased by 79.69 per cent and internal debt rose by 67.09 per cent over the previous year.
As seen from Chart 1.16¸ Capital Receipts as a percentage of GSDP grew from 6.38 per cent in 2023-24 to 9.78 per cent in 2024-25 after hovering around 6.00 per cent during the previous years. This was mainly because debt capital receipts grew faster than the GSDP, indicating rising debt dependence and potential risks to fiscal sustainability. It may be mentioned that increased reliance on debt carries greater interest burden. The near overlap of the graphs of Capital Receipts and Debt Receipts as percentages of GSDP highlights the dominance of debt receipts within Capitals Receipts of the state over the five-year period.
During the Exit Conference, the State Government stated that the increase in Debt Capital Receipts are due to significant loan amount received by the State under Special Assistance to States for Capital Investment (SASCI) which is effectively in the nature of a Grant even though it is accounted as loan as per accounting procedure as it is in the form of interest free loan from the Government of India with tenure of 50 years. The State Government stated that the matter of accounting SASCI as loan has already been take up with the Ministry of Finance, Government of India and further instructions are awaited.
It may be mentioned that suitable disclosure on SASCI loan are incorporated in the SFAR since 2023-24 based on the request of the State Government and the same is also incorporated in the SFAR 2024-25.
The projected revenue, deficits and GSDP by the 15th Finance Commission and actuals for the FY 2020-21 to FY 2024-25 are given in the Table 1.13.
Government expenditure is classified into Revenue expenditure, Capital expenditure, and Loans and Advances. Revenue expenditure includes costs for maintenance, repairs, and day- to-day functioning of Departments, including administrative and establishment expenses. Capital expenditure relates to the initial construction of projects and sanctioned improvements or additions to assets. Loans and advances comprise funds provided by the Government to Public Sector Undertakings and other entities, which are recoverable over time. Details of expenditure, total expenditure as percentage of GSDP and share of its components are given in Table 1.14, Chart 1.17 and Chart 1.18 respectively.
Out of the total expenditure of ₹ 22,359.89 crore incurred by the State during the financial year 2024-25, a portion of ₹ 3,185.58 crore pertained to pass-through transactions such as Centrally Sponsored Schemes (including Central Assistance, Special Assistance, etc.) Finance Commission Grant and other transfers/Grants (including Capital Expenditure), etc.
The State's expenditure in 2024-25 continued to be dominated by Revenue expenditure. This reflects high routine and administrative expenses such as salaries, pensions, interest payments and subsidies which might limit fiscal flexibility. However, increasing share of capital expenditure reflects signals a positive shift towards investment in asset formation and infrastructure development which has the potential to enhance productive capacity and future revenue generation. Although the State's expenditure pattern was more towards consumption, gradual rise in productive investment as highlighted by growing share of capital expenditure reflects a favourable movement towards fiscal sustainability and achieving growth objectives in the long-run provided the trend is sustained.
Sector-wise composition of expenditure is given in Table 1.15 and relative share of various sectors in total expenditure is depicted in Chart 1.19.
Chart 1.19 shows that during 2024-25, economic services (₹8,360.91 crore) constituted the largest share in the total expenditure of the State followed by social services (₹ 7,895.21 crore), both accounting for nearly 72 per cent of total expenditure. General Services constituted around 27 per cent.
As highlighted in Chart 1.19, over the last five years, the economic services overtook social services as the largest sector in the total expenditure. The trend of rising allocations to the economic services reflects greater orientation towards development programs. Further, share of expenditure on general services saw decline indicating rationalisation in administrative expenses. This trend of expenditure structure needs to be sustained to advance the goals of sustainable development.
Revenue expenditure is incurred to maintain the current level of services and payment for the past obligation. As such, it does not result in any addition to the State's infrastructure and service network. Growth of revenue expenditure, its ratio to total expenditure, GSDP and revenue receipts are shown in Table 1.16.
As seen in Table 1.16, during 2024-25, Revenue expenditure remained marginally lower than the Revenue receipts (₹ 17,153.91 crore). Further, its growth rate remained below that of GSDP. However, it constituted 76.39 per cent of the total expenditure down from 86.36 per cent in 2020-21. As persistently high Revenue expenditure-to-total expenditure reflects limited space for capital investments, reducing it further is crucial for securing fiscal flexibility and accelerating growth through greater capital investments.
Sector-wise composition of Revenue expenditure is given in Table 1.17 and relative share of various sectors in Revenue expenditure is depicted in Chart 1.20. Detailed Sector-wise expenditure is given in Appendix 1.2.
In 2024-25, Social services continued to dominate Revenue expenditure, accounting for 37 per cent, indicating high share of expenditure on health, education and welfare. General Services constituted 34 per cent, reflecting expenditure on administration and interest payments, while Economic Services accounted for 29 per cent.
The expenditure mix reveals a consumption-oriented pattern, with substantial resources absorbed by non-developmental heads. This structure may constrain fiscal sustainability and reduce scope for capital investment in growth sectors. The State needs to rationalise routine administrative spending, ensure better control over committed liabilities, and prioritise development-oriented outlays in social and economic sectors to achieve long-term inclusive growth.
The committed expenditure of the State Government on Revenue account consists of interest payments; expenditure on salaries and wages; and pensions. It has first charge on Government resources. The components of committed expenditure are given in Table 1.18 and committed expenditure as a percentage of Revenue Receipts and remaining fiscal space for other expenditure is given in Chart 1.21.
As shown in Table 1.18, committed expenditure increased from ₹ 8,608.56 crore in 2023-24 to ₹ 9,545.73 crore in 2024-25 and accounted for 55.88 per cent of the total Revenue Expenditure. Although its share declined and fiscal space for capital or welfare expenditure improved over the five-year period from 2020-21 to 2024-25, the year 2024-25 witnessed a spike in share of committed liabilities and hence drop in fiscal space for capital or welfare expenditure with respect to the last year. Salaries and wages remained the largest component within committed expenditure. To ensure committed expenditure is sustainable and fiscal space maintains the improving trend over the recent years, sustained reforms in expenditure management, employee cost rationalisation and debt servicing are crucial.
The subsidies during the current year increased by ₹ 80.62 crore (136.62 per cent) from the previous year. The increase was mainly due to increase of ₹ 23.70 crore in food subsidy for expenditure on intra-state movement and handling of food grains and Fair Price Shop dealers' margin, etc. under the National Food Security Act and additional state financial assistance under PDS for Government nominees/PDS agents, ₹ 20.68 crore in fisheries subsidy for welfare of fishermen, State Aquaculture Mission, Blue Revolution and Pradhan Mantri Matsya Sampada Yojana, and ₹ 20.33 in agriculture subsidy under initiatives including Regional Centre for Training and Production of Mushroom, National Mission on Agricultural Extension and Technology (NMAET) and Mission for Integrated Development of Horticulture (MIDH), Horticulture Mission for North East and Himalayan States (HMNEH). Further, the State Government also gave ₹ 14.40 crore towards subsidy to private airlines under the Transport Department in 2024-25.
Department-wise major subsidies for the years 2020-21 to 2024-25, are shown in Table 1.19.
Table 1.19 shows that total subsidy amount increased by 268.28 per cent from ₹ 37.91 crore in 2020-21 to ₹ 139.63 crore in 2024-25. From Chart 1.22, shares of subsidies in Revenue expenditure as well as total expenditure rose significantly over the previous year 2023-24. Similar trend is seen for subsidies as compared of Revenue receipts and GSDP of the State. Excessive subsidies can strain resources needed for development expenditure. Targeted delivery mechanisms, periodic review of subsidies to enhance efficiency, and greater adoption of direct benefit transfers are crucial for improving transparency, minimising leakages, and reducing the overall fiscal burden.
During the Exit Conference, the State Government stated that the increase in subsidies under Food and Civil Supplies and Consumers Affairs Department was mainly due to expenditure on transportation of food grains under National Food Security Act.
Assistance provided by way of grants to the local bodies and other institutions during the period 2020-21 to 2024-25 is presented in Table 1.20.
During the current year, financial assistance to the local bodies and other institutions decreased by ₹ 505.49 crore (8.17 per cent) over the previous year. This was mainly due to drop in assistance to Municipal Corporations and Municipalities by 26.67 per cent (₹ 15.93 crore). The overall quantum of financial assistance to the local bodies and other institutions as percentage to Revenue expenditure decreased to 33.26 per cent during the current year from 37.31 per cent of the previous year.
As Meghalaya is covered under the Sixth Schedule of the Constitution of India, the constitutional provision to constitute a State Finance Commission do not apply to the State as per Article 243M (w.r.t. Panchayats) and Article 243ZC (w.r.t. Municipalities). However, the State enacted Meghalaya State Finance Commission Act, 2012 which mandates constitution of the Meghalaya State Finance Commission every five years to review the financial position of the Traditional Bodies, Municipal Boards and the Autonomous District Councils (ADCs). It is mandated to recommend sharing of Revenue between the State and the Traditional Bodies, Municipal Boards and the Autonomous District Councils (ADCs). As per Section 3(1) of the Act, the State Government shall as soon as be one year from the enactment of the Act, and thereafter at the expiry of every fifth year constitute a body to be known as the Meghalaya State Commission to review the financial position of the traditional bodies, municipalities or municipal boards notwithstanding any term by which ULBs are called in the State. Though Government of Meghalaya enacted the Act, on 30th March 2012 and framed the Meghalaya Finance Commission Rules, 2013 (notified in December 2013) as per Section 10 of the Act, the State Government has not constituted the State Finance Commission (December 2025).
Capital expenditure is primarily expenditure on creation of fixed infrastructure assets, such as roads, buildings, etc. Capital expenditure, in both the Centre and the State, is being met from budgetary support and extra budgetary resources/off-budget borrowings. It also includes investments made by the State Government in Companies/Corporations. Trends of capital expenditure in the State over the last five years i.e. 2020-25 is given in Chart 1.23.
Apart from Capital expenditure of ₹ 5,245.98 crore, State Government also transferred ₹ 33.09 crore as Grant-in-Aid for creation of Capital assets to the local bodies and other institutions. Further, percentage of Capital Expenditure as compared to Debt receipts was 37.72 per cent, which indicates that the borrowings were not proportionately converted to infrastructural development.
Chart 1.23 depicts that the State's Capital expenditure showed consistent growth during the five -year period from 2020-21 to 2024-25 except for a marginal dip in 2022-23. Its share in Total Expenditure also increased from 13.02 per cent in 2020-21 to 23.46 per cent in 2024-25 showing prioritisation of long-term asset creation. This share was 21.41 per cent in the previous year 2023-24.
Further, the State gave ₹ 33.09 crore as Grants for creation of capital assets which was almost double the amount given for the same in the previous year (₹ 16.14 crore). While the increase in allocation of resources for creation of Capitals assets to generate additional revenue and maintain fiscal sustainability, regular assessment and effective monitoring is crucial for realisation of the intended purposes behind these investments.
Sector-wise composition of Capital expenditure is given in Table 1.21. Detailed Sector-wise expenditure is given in Appendix 1.2.
During 2024-25, Economic Services continued to dominate capital expenditure with a share of 64 per cent, followed by Social Services (32 per cent), reflecting focus on infrastructure and social sector investment. The consistent rise in outlay for developmental sectors indicates a positive shift towards growth-oriented spending.
As of 31 March 2025, based on the Finance Accounts, the State Government's investment in companies, corporations and other bodies stood at ₹ 4,444.43 crore, comprising Government Companies (₹ 4,215.15 crore), Co-operative Bank, Societies, etc. (₹ 121.91 crore) and Statutory Corporations (₹ 107.37 crore).
Trends of investment at the end of the year in companies, corporations, and co-operative banks and societies, and return on these investments is depicted in Chart 1.25. Rate of return on investment made vis-à-vis average rate of interest on Government borrowing is depicted in Chart 1.26.
During 2024-25, the return on investment was meagre 0.20 crore 11 (0.005 per cent). The return was negligible and remained below 0.01 per cent during 2020-25 while the average rate of interest paid by the State Government on its borrowings was between 6.12 per cent and 7.47 per cent during the same period. Over the past five years, the difference in cost of Government borrowings and return on investments in PSUs was to the tune of ₹ 4,363.59 crore. Throughout the entire period from 2020-21 to 2024-25, returns on investment remained persistently low far below the cost of Government borrowings as measured by average rate of interest on its borrowings which was between 5.31 per cent and 7.47 per cent. This reflects inefficient use of public funds and fiscal stress.
It was found that ₹ 4,322.52 crore was invested in 11 State PSUs upto the year 2024-25 (based on Finance Accounts for 2024-25). Out of 11 PSUs, only one PSU viz. Meghalaya State Warehousing Corporation (MSWC) gave return of ₹ 0.06 crore during the FY 2024-25. which was only zero per cent of total investment. However, Government borrowed funds at an average rate of interest of 5.31 per cent.
The figures of Government investments as equity in State Public Sector Enterprises (SPSEs) should agree with those appearing in the accounts of the PSEs. Reconciliation of figures is necessary to figure out the difference in accounts of PSEs and Finance Accounts of the State Government. But there is a difference between the number of SPSEs recorded in the Finance Accounts (11) and that in the Audit Report on General, Social and Economic Sectors (22). The differences have arisen primarily due to the investment transactions being booked in Government accounts based on the vouchers received in the Office of the Principal Accountant General (A&E) and the details given in the Audit Reports obtained from the individual SPSEs.
A well-defined dividend policy mandating a minimum return from profit-making enterprises, enables the State Government to optimise its returns from investments in SPSEs and enhances monitoring of the SPSEs financial performance. It was observed that the state has not formulated or enforced a dividend policy for its Public Sector Undertakings (PSUs). This has resulted in persistently low returns (0.005 per cent of investment) on the Government's substantial equity investments, undermining the potential for Non-tax Revenue generation.
During the Exit Conference (January 2026), Audit suggested considering practice adopted by Union Government wherein performance targets are fixed for each year for such undertakings through a Memorandum of Understanding (MOU) between the Administrative Department and the SPSU. The State Government agreed to explore the mechanism of fixing annual performance targets for SPSUs.
During the previous financial year (2023-24), three State PSUs registered profits. In that year, none of the profit making SPSEs had declared any dividend. There was no information about the existence of any specific policy of the State Government regarding payment of minimum dividend by the SPSEs.
Out of the 22 SPSUs, two SPSUs were non-working/defunct and no investment therein had remained un-recouped. Of the remaining active 20 SPSUs, none paid any dividend during the period. This calls for reviewing viability of nonperforming entities, considering disinvestment where feasible, and enforcing dividend declarations to improve returns and reduce fiscal burden.
In addition to the investments in co-operative societies, corporations and companies, the State Government has also been providing loans and advances to many institutions/organisations. Table 1.22 presents the position of outstanding loans and advances as on 31 March 2025 and interest receipts vis-à-vis interest payments by the State Government on its borrowings during the last five years.
Table 1.22 shows that the total outstanding loans and advances as on 31 March 2025 was ₹ 1,019.51 crore. Out of the loans of ₹ 32.72 crore advanced during 2024-25, ₹ 22.30 crore was given to Government servants and ₹ 9.31 crore to Co-operative Institutions for piggery development.
During 2024-25, an amount of ₹ 21.97 crore was recovered out of which ₹ 21.52 crore was from Government Servants. The actual recovery ( ₹ 21.97 crore) was also lower than what was estimated in the Budget (₹ 29.95 crore).
Interest receipts decreased from ₹ 7.41 crore in 2023-24 to ₹ 4.24 crore, with rate of interest received from total outstanding loans and advances decreased from 0.73 per cent in 2023-24 to 0.42 per cent in 2024-25.
The Contingency Fund of the Government of Meghalaya is intended to provide advances for meeting unforeseen expenditure, pending its authorisation by the State Legislature. The fund is recouped once the Legislature approves the additional expenditure. The corpus of the Fund is ₹ 505.00 crore.
During 2024-25, ₹ 562.46 crore had been withdrawn from the fund under various budgetary heads. However, the entire amount of ₹ 562.46 crore had been replenished by the end of the FY 2024-25. As on 31st March 2025, Contingency Fund had a balance of ₹ 505.00 crore.
Details of expenditure made out of the Contingency Fund are discussed in paragraph no. 2.8 of Chapter II.
Receipts and Disbursements in respect of certain transactions such as Small Savings, Provident Funds, Reserve Funds, Deposits, Suspense, Remittances, etc., which do not form part of the Consolidated Fund, are kept in the Public Account set up under Article 266(2) of the Constitution and are not subject to vote by the State Legislature. The balance after disbursements during the year is the fund available with the Government for use for various purposes.
The component-wise net balances in Public Account of the State are given in Table 1.23.
Reserve Funds are created for specific and defined purposes under the Public Account of the State Government. These funds are met from contributions or grants from the Consolidated Fund or from outside agencies. It comprises interest bearing reserve funds and reserve funds not bearing interest.
There were thee interest bearing funds and three Reserve Funds not bearing interest as on 31 March 2025. The fund balances lying in these Reserve Funds as on 31 March 2025 are given in Table 1.24.
As per the agreement with Reserve Bank of India (RBI), State Governments must maintain a minimum daily cash balance of ₹ 21 lakh with the Bank. If the balance falls below this minimum, the shortfall is met through instruments like Ways and Means Advances (WMA)/Special Ways and Means Advances (SWMA)/ Special Drawing Facility (SDF)/ Overdrafts (OD), with the WMA limit revised periodically by RBI.
The State Government invests surplus cash balances, including those from earmarked reserve funds in GoI securities and Treasury Bills. Earnings from these investments are credited under '0049-Interest Receipts'.
It is undesirable for the State Government to raise market loans while holding large unutilised cash balances, as it leads to idle funds rather than productive use. Cash balance and investment details for 2023-24 and 2024-25 are provided in Table 1.25.
Details of Cash Balance Investment Account during the last five years is given in Table 1.26
During 2024-25, the State Government maintained the minimum balance without taking any advance for 67 days. However, the State had to resort to Ways and Means Advances (WMA) for 52 days, Special Drawing Facility (SDF) for 229 days and Overdrafts (OD) for 17 days to maintain the minimum balance. This facility was availed by incurring an interest expenditure of ₹ 10.26 crore (₹ 1.82 crore for WMA and ₹ 8.44 crore for SDF).
The closing balance under General Cash Balances stood at ₹ 51.41 crore as on 31 March 2025, compared to ₹ 39.19 crore at the beginning of the year. The investment of earmarked funds declined from ₹ 891.43 crore to ₹ 775.58 crore, indicating partial utilisation of these funds.
Fiscal Sustainability is the ability of a Government to manage its Revenue and Expenditure in a manner that ensures it can meet its current and future obligations such as public services, infrastructure, and debt repayments without excessive borrowing or accumulating unsustainable debt. It implies maintaining a stable balance between revenue generation and expenditure over the long term. Chart 1.27 and Chart 1.28 shows Receipts and Expenditure of the State as a percentage of GSDP, during FY 2020-25 respectively.
Outstanding liability of the State along with its percentage to GSDP for the years 2020-21 to 2024-25 is depicted in Chart 1.29.
Total liabilities of the State Government typically constitute Internal Debt of the State (market loans, ways and means advances from RBI, special securities issued to National Small Savings Fund and loans from financial institutions, etc.), loans and advances from the Central Government, and Public Account Liabilities. The component-wise liability trends of the State for the period of five years beginning from 2020-21 are presented in Table 1.27.
During the current year 2024-25, Outstanding Total Liabilities increased by 23.61 per cent (₹ 5,081.14 crore) over the previous year 2023-24. This was mainly due to 27.45 per cent (₹ 4,692.74 crore) increase in outstanding Public Debt which stood at ₹ 21,787.43 crore. Within Public Debt, Loan from the Government of India (GoI) increased significantly by
78.38 per cent (₹ 2,418.96 crore) while internal debt grew by 16.23 per cent (₹ 2,273.78 crore). The increase in internal debt included additions of ₹ 704.58 crore and ₹ 522.91 crore under the temporary cash management facilities of Ways and Means Advances (WMA) and Special Drawing Facility (SDF) respectively, availed from the Reserve Bank of India (RBI). Further, outstanding public accounts liabilities rose by 8.78 per cent (₹ 388.40 crore) over the previous year 2023-24.
Over the five-year period from 2020-21 to 2024-25, the State's total outstanding liabilities increased substantially by 95.33 per cent (₹ 12,982.71 crore) from ₹ 13,618.74 crore to (₹ 5,186.71 crore) and internal debt by 63.94 per cent (₹ 6,350.48 crore).
Break-up of outstanding total liabilities at the end of 2024-25 is shown in Chart 1.30.
Chart 1.31 depicts the quantum of internal debt taken vis-à-vis repaid during the period of five years i.e. 2020-25.
Outstanding internal debt of the State Government increased by ₹ 6,350.48 crore (63.94 per cent) from ₹ 9,931.96 crore in 2020-21 to ₹ 16,282.44 crore in 2024-25. An amount of ₹ 1,009.32 crore was paid towards interest on internal debt during 2024-25.
During the Exit Conference (January 2026), the State Government stated that Total Liabilities Receipts of the State Government in 2024-25, which stood at ₹ 18,476.23 crore, was mainly on account of receipts under Ways and Means Advances (WMA) and Special Deposit Facility (SDF) which are made available by the Reserve Bank of India for cash management.
Borrowed funds should ideally be used to fund capital creation and developmental activities. Using borrowed funds for meeting current consumption and repayment of interest on outstanding loans is not a healthy trend. Table 1.28 and Chart 1.32 depict the utilisation and trends of borrowed funds during 2020-25 respectively.
In the year 2024-25, the State borrowed a total of ₹ 5,809 crore as public debt comprising internal debt and loan from the Government of India. Significant portion of the total borrowings went towards Capital expenditure, which stood at ₹ 5,246 crore. The State incurred ₹ 1,116 crore towards repayment of principal of earlier borrowings. As the State recorded revenue surplus of ₹ 72.71 crore in 2024-25, no portion of Revenue expenditure was met out of borrowings. Further, the State also disbursed ₹ 33 crore as loans and advances while making recovery of ₹ 22 crore from previous loans and advances resulting in net disbursal of ₹ 11 crore.
Over the five-year period from 2020-21 to 2024-25, total public debt borrowings grew by 152 per cent from ₹ 2,301 crore in 2020-21 to ₹ 5,809 crore in 2024-25. During the same period, Capital expenditure rose by over 200 per cent from ₹ 1,734 crore in 2020-21 to ₹ 5,246 crore in 2024-25.
As the share of borrowings utilised for debt repayment remained moderate between 15 per cent and 21 per cent of the borrowings and the revenue surplus was achieved in the last five years except in 2020-21 (revenue deficit of ₹ 815 crore) and 2022-23 (₹ 44 crore) along with sustained growth in capital expenditure, the recent trend of the utilisation of borrowed funds indicates expanding fiscal space favourable to long-term fiscal sustainability supported growing investment in infrastructure. However, this fiscal parameter alone is not conclusive on fiscal position of the State. The fiscal space is contingent on the State's other fiscal parameters including fiscal deficit and outstanding liabilities to GSDP ratio, adhering to prescribed norms under the Meghalaya Fiscal Responsibility and Budget Management Act, 2006 and maintaining a disciplined borrowing strategy with focus on capital assets creation and Revenue mobilisation improvement though control on committed expenditure which comprises salary and wages, pensions and interest payments.
Debt maturity and repayment profile indicates commitment on the part of the Government for debt repayment or debt servicing. Debt maturity profile of the State is depicted in Chart 1.33.
As on 31 March 2025, outstanding Public Debt stood at ₹ 21,787.44 crore comprising ₹ 16,282.44 crore as internal debt and ₹ 5,504.99 crore as loans from the Government of India. Out of this, 14.24 per cent (₹ 3,102.81 crore) is payable within the next year. Along with this, maturity profile of 59.09 per cent (₹ 12,873.95 crore) of public debt is concentrated within the short to medium term (0-7 years).
A concentrated short- to medium-term maturity profile indicates potential rollover risks and liquidity pressure. A high concentration of liabilities maturing within the short to medium term indicates potential debt bunching, increasing refinancing and liquidity pressure on the State.
Table 1.29 depicts financing pattern of the fiscal deficit during 2020-25
As per Finance Accounts of the State for the financial year 2024-25, the Revenue Surplus of the state was ₹ 72.71 crore (0.12 per cent of GSDP) and fiscal deficit was ₹ 5,184.01 crore (8.69 per cent of GSDP). However, Audit found that, during 2024-25, the State Government misclassified, expenditure of ₹ 125.40 crore of revenue nature as Capital expenditure (Details discussed in paragraph no 2.5.6 of Chapter II). This resulted in overstatement of revenue surplus to that extent and the revenue surplus worked out to be revenue deficit of ₹ 52.69 crore (0.09 per cent of GSDP) after Audit.
As per the Meghalaya Fiscal Responsibility and Budget Management (MFRBM) Act, 2006 and its amendments aligned with the 15th Finance Commission, the State aims to:
Achievements, vis-à-vis the fiscal targets, prescribed in the MFRBM Act for the FYs 2020-21 to 2024-25, post Audit are detailed in Table 1.30.
In the year 2024-25, as per the Finance Accounts, the State recorded revenue surplus of ₹ 72.71 crore. However, Audit found that this surplus was overstated by ₹ 125.40 crore due to misclassification of Revenue expenditure as Capital expenditure (discussed in paragraph 2.5.6 of Chapter II). This results in post Audit revenue deficit of ₹ 52.69 crore which is not in compliance with the target of maintaining revenue surplus set under the MFRBM Act, 2006 as amended. This represents a sharp reversal from the previous year, when the post-audit revenue surplus stood at ₹ 1,393.78 crore in compliance with the target fixed. This change is mainly due to decline in Revenue Receipts stemming from 40.15 per cent (₹ 2,238.49 crore) decrease in Grants-In-Aid from the Government of India as discussed under Paragraph 1.2.1. Over the five-year period, the State’s post audit revenue balance achieved the target of revenue surplus only in 2021-22 and 2023-24 which witnessed substantial growth in Revenue receipts (₹ 3,590.90 crore in 2021-22 over 2020-21 and ₹ 3,157.99 crore in 2023-24 over 2022-23).
In respect of fiscal deficit, post Audit figure stood at ₹ 5,184.01 crore. As percentage of the GSDP, fiscal deficit was 8.69 per cent which was not in compliance with the target for the year under MFRBM Act. Throughout the five-year period from 2020-21 to 2024-25, post Audit figure of fiscal deficit as percentage of GSDP did not adhere to the target set under MFRBM Act, 2006 as amended, in any of these years. State-wise and year-wise comparable numbers of deficit indicators and total outstanding liabilities as percentage of the GSDP is given at Appendix 1.4.
Chart 1.34 illustrates the trend of post Audit ratios of revenue deficit/revenue surplus, fiscal deficit and primary deficit with respect to GSDP, over the last ten years from 2015-16 to 2024-25. During this period, the State witnessed revenue deficit in the years 2018-19, 2019-20, 2020-21, 2022-23 and 2024-25 which saw either subdued growth or decline in revenue receipts compounded by higher committed expenditure and increased subsidies.
Further, fiscal deficit/GSDP ratio decreased from 2020-21 (7.71 per cent) to 2021-22 (5.37 per cent) primarily due to higher revenue receipts (increased by ₹ 3,590.90 crore) despite rise in capital expenditure (by ₹ 794.34 crore). However, the ratio saw steady rise from 2021-22 onwards driven largely by increased Capital spending, particularly in 2023- 24 (Capital expenditure of ₹ 4,529.54 crore) and 2024-25 (Capital expenditure of ₹ 5,245.98 crore). The year 2024-25 saw the highest fiscal deficit/GSDP ratio as the non- debt receipts of the State declined (by ₹ 826.01 crore) alongside a sharp increase of 76.24 per cent (₹ 716.44 crore) in Capital expenditure.
The targets set by 15th FC and those projected in the State budget vis-à-vis achievements in respect of major fiscal aggregates with reference to GSDP during 2024-25 are given in Chart 1.35, Chart 1.36 and Chart 1.37.
During the year 2024-25, the State narrowly missed the target for revenue surplus as a percentage of GSDP, set by the Fifteenth Finance Commission (15th FC) and that projected in the budget estimates as the actual stood at revenue deficit of 0.09 per cent of GSDP. Further, both the fiscal deficit-GSDP ratio and outstanding liabilities-GSDP ratio fell short of the 15th FC targets as well as the budget projections.
During the Exit Conference (January 2026), the State Government stated that outstanding liabilities as percentage of GSDP exceeding the target of 28.00 per cent set under Meghalaya Fiscal Responsibility & Budgetary Management (MFRBM) Act, 2006, was mainly due to SASCI loans. If SASCI loans were excluded, the ratio is substantially lower.
Debt sustainability refers to the ability of the State to service its debt obligation now and in future. Analysis of variations in debt sustainability indicators for five years from 2020-21 to 2024-25 is given in Table 1.31. Ten years analysis is given at Appendix 1.5.
Table 1.31 indicates:
Over the past five years, the state's average debt burden, measured by the overall liabilities-GSDP ratio, consistently grew, even if the pandemic year (2020-21) is ignored. After registering a marginal decrease of almost two percentage points in 2021-22 over the previous year driven mainly by sharp recovery in post-pandemic economic growth as measured by nominal GSDP growth rate of 19.08 per cent in 2021-22 exceeding growth in overall debt, it witnessed steady rise, peaking at 44.61 per cent in this year 2024-25. This is partly attributable to growing Capital expenditure which pushed fiscal deficit wider from ₹ 2,603.56 crore in 2021-22 to ₹ 5,184.01 crore in 2024-25. Given the significant acceleration in nominal growth due to inflation as well as economic recovery from a low base in 2020-21, the debt-to-GSDP ratio witnessed a marginal improvement of 1.83 percentage points from 40.32 per cent in 2020-21 to 38.49 per cent in 2021-22. Thereafter, it started rising again and reached 39.62 per cent in 2022-23 and further increased by about one percentage point to a five-year high of 44.61 per cent in 2023-24. In the latest three years i.e., 2022-23 to 2024-25, increase in debt surpassing the nominal growth allowed the debt-GSDP to rise persistently. This resulted in the State breaching the target set for overall liabilities-GSDP ratio under the MFRBM Act, 2006 throughout the last five years. Therefore, the State requires persistent spending restraint and higher growth boosting expenditure to reduce its reliance on borrowing before its debt gets into a spiral condition. On the other hand, the State succeeded in keeping this ratio within the indicative debt path set by Finance Commission only in 2020-21, 2021-22 and 2022-23, which are higher than the targets set under the FRBM Act. However, the State failed to adhere to even the Finance Commission targets in the last two years i.e., 2023-24 and 2024-25 suggesting misalignment of the borrowings with the GSDP growth. The target for outstanding liabilities-GSDP ratio set by MFRBM Act was never achieved in the last ten years.
Overall, these indicators suggest that the State's fiscal space has gradually narrowed and debt sustainability has come under pressure. Over the medium and long term, debt growth has generally exceeded nominal GSDP growth, leading to a rising debt-to-GSDP ratio and repeated deviations from FRBM and Finance Commission targets. While the growth-interest differential remained mostly favourable, its stabilising effect has been offset by continuing primary deficits. In addition, a higher share of borrowings being absorbed by debt servicing has limited the resources available for productive expenditure, and frequent use of RBI liquidity facilities calls for improving cash management and reducing interest liabilities for availing these facilities towards better fiscal space of the state. Despite the concerns arising from rising outstanding liabilities-GSDP ratio, declining share of net borrowings available for productive use and increasing reliance on cash management facilities, the favourable GID indicates debt sustainability provided the primary deficit declines and sufficient surplus is generated over the medium to long term through rationalisation of committed liabilities and timely commissioning of projects funded by growing capital expenditure, enabling repayment of the current debt stock.
Guarantees are contingent liabilities on the Consolidated Fund in case of borrower defaults. The State extends guarantees for loans raised by entities like statutory corporations, boards, local bodies, and co-operative institutions. As per the Meghalaya Fiscal Responsibility and Budget Management (MFRBM) Act, 2006, the Government may prescribe such targets as may be deemed necessary to restrict issuing of guarantees except on selective basis where the quality and viability of the scheme to be guaranteed is properly analysed. Details of the guarantees and status of outstanding guarantees to total receipts for the last five years is given in Table 1.32.
The outstanding guarantees for ₹ 2,905.80 crore as on 31 March 2025 was in respect of Power (₹ 2,890.80 crore); Cooperation (₹ 8.10 crore); and Commerce & Industries (₹ 6.90 crore).
The MFRBM Act has not prescribed the limits of guarantees extended by the State. However, the State enacted Meghalaya Ceiling on Government Guarantees Act, 2025 which prescribes ceilings on total outstanding Government guarantees as on the first day of April of any year at 10 per cent of the Gross State Domestic Product (GSDP) estimated for the year and total fresh Government guarantees issued in a year at five per cent of the Revenue Receipts or 0.5 per cent of Gross State Domestic Product (GSDP) estimated for the year, whichever is less.
During the period from 2020-21 to 2024-25, the last four years witnessed net reduction of guarantees as the reduction in outstanding guarantees exceeded addition of fresh guarantees. This reflects efforts to avoid accumulation of guarantees.
The State constituted Guarantees Redemption Fund in the Public Account for meeting its obligations arising out of the guarantees issued on behalf of the state level bodies. As per the provisions of the Scheme for Constitution and Administration of the Guarantees Redemption Fund which came into force from the year 2021-22, State Government was required to initially contribute a minimum of one per cent and thereafter at the rate of 0.50 per cent of outstanding guarantees at the end of the previous year to achieve a minimum level of at three per cent of the outstanding guarantees at the end of the previous year in next five years i.e., 2025- 26. The Fund shall be gradually increased to the desirable level of five per cent. As on 31 March 2025, the Guarantee Redemption Fund stood at ₹ 83.32 crore - about three per cent of the outstanding guarantees at the end of the previous year. This follows the target set under the provisions cited.
Further, during the year 2024-25, the State Government was required to contribute a minimum of ₹ 14.54 crore i.e.,0.50 per cent of the outstanding guarantees at the end of the previous year 2023-24 (₹ 2,908.20 crore). However, the State did not make any contribution to the fund during the year.
As per letter No FIN(B)/91/89/53 of the Finance Department, Government of Meghalaya dated 24th April 1989 which came into effect from 1st April 1989, the State Government is required to levy a guarantee fee of one per cent of the guaranteed amount before the execution of the guarantee deed. For the subsequent years, the guarantee fee is fixed at 0.50 per cent on the amount guaranteed and outstanding on the 31st of March each year for the next financial year till the guarantee is vacated or till the loan is liquidated. The State Government did not levy or receive any guarantee fee during the year. As on 31 March 2025, the outstanding receivable guarantee fee stood at ₹ 1.14 crore.
Deficits can be improved by enhancing revenues and rationalising expenditures. This includes strengthening tax compliance, widening the tax base, revising user charges, and monetising idle Government assets. On the spending side, better targeting of subsidies, controlling salary and pension growth, and ensuring proper classification of expenditure are key factors. Prioritising productive capital investment and improving debt management through transparent and efficient borrowing can further ease fiscal pressure. These measures collectively create fiscal space and help reduce revenue, fiscal, and primary deficits in a sustainable manner. These have been discussed in succeeding paragraphs.
Untapped revenue potential that, if harnessed effectively, could significantly enhance fiscal space and reduce dependence on debt. Inefficiencies in assessment, undervaluation, and limited enforcement mechanisms of key tax streams such as State GST, Stamp Duty, and Excise will lead to subdued revenue growth. Under-realised non-tax revenues, with low user charges, poor cost recovery, and suboptimal returns on public assets and investments also impede the fiscal space. Timely realisation of pending arrears is (tax and non-tax) another step towards enhancing the fiscal space.
As on 31 March 2025, the arrears of revenue in respect of principal heads of revenue were ₹ 150.30 crore, of which ₹ 39.07 crore were outstanding for more than five years, as depicted in Table 1.33.
The information on number of cases pending at the beginning of the year, cases becoming due for assessment, cases disposed of during the year and number of cases pending for finalisation at the end of the year, as furnished by the Department of Excise and Department of Taxation in respect of Sales Tax/VAT is depicted in Table 1.34.
During the period 2020-25, the number of pending cases at the end of the respective years were 70,387 (2020-21); 58,418 (2021-22); 52,436 (2022-23); 51,486 (2023-24) as against 51,686 cases at the end of 2024-25. Disposal of cases during this period ranged between 4.13 per cent and 19.85 per cent.
The cases of evasion of tax detected, cases finalised and the demands for additional tax raised are important indicators of revenue collection efforts of the State Government.
The details of cases of evasion of tax detected by the Excise and Taxation, cases finalised and the demand for additional tax raised during the year 2024-25, as reported by the Departments concerned, are depicted in Table 1.35.
Chart 1.38 and Chart 1.39 depicts Committed expenditure and subsidies together as a percentage of Revenue Receipts and Revenue Expenditure during the ten-year period from 2015-16 to 2024-25 respectively.
In 2024-25, the State's committed expenditure of ₹ 9,545.73 crore comprising salaries and wages (₹ 6,440.18 crore), pensions (₹ 1,874.42 crore), and interest payments (₹ 1,231.13 crore), accounted for 55.65 per cent of the Revenue Receipts. In addition, subsidies amounted to ₹ 139.63 crore, bringing the total rigid expenditure to ₹ 9,685.36 crore, which was 56.46 per cent of the State's Revenue receipts. The high and inflexible nature of such expenditure significantly compresses fiscal space, limiting the State's ability to allocate resources towards capital investment and developmental priorities. This structural imbalance increases the risk of persistent revenue and primary deficits, constrains long-term fiscal sustainability, and reduces the Government's capacity to respond to emergent socio-economic challenges.
There is an urgent need for expenditure reform through rationalisation of subsidies, improved targeting, and prudent management of salary and pension commitments, to enhance fiscal flexibility and ensure a sustainable fiscal path.
An assessment of capital blocked in incomplete Capital projects would also indicate the quality of Capital Expenditure. Blocking of funds in incomplete projects/ works impinges negatively on the quality of expenditure and deprives the State of the intended benefits of the projects for prolonged periods. Further, funds borrowed for implementation of these projects during the respective years would lead to an extra burden, in terms of servicing of debt and interest liabilities. Details of the incomplete projects are shown in Table 1.36 (based on information provided by the State Government for Appendix-IX of the Finance Accounts for the year 2024-25).
Out of the estimated cost of ₹ 1,958.73 crore on these 89 ongoing projects, ₹ 986.49 crore was spent till 2024-25. Therefore, due to non-completion of these 89 projects, Capital Expenditure of ₹ 986.49 crore remained blocked.
Due to incomplete information in Appendix-IX (Commitments of the Government-List of Incomplete Capital Works) of the Finance Accounts for the year 2024-25 (provided by the State Government), Audit could not ascertain the actual progressive expenditure, physical progress of work, position of pending payment (future liability) and revised cost, if any, as on 31 March 2025.
Undischarged/deferred liabilities, if not addressed timely, will reduce the available fiscal space for future developmental and infrastructure spending. Besides creating lack of transparency and credibility, this impair the state's ability to raise resources in a sustainable manner, thereby impacting overall fiscal health and long-term sustainability.
Audit observed that the State Government had accumulated several un-discharged liabilities over the years, which have significant implications for fiscal sustainability. These include:
The cumulative value of these un-discharged liabilities amounted to ₹ 406.39 crore, which is equivalent to 0.68 per cent of the GSDP and 7.84 per cent of the Fiscal Deficit for the year 2024-25.
Audit recommends that the State Government disclose and address all un-discharged liabilities transparently and make provisions for timely discharge of these obligations to avoid future fiscal stress.
GSDP of the state grew from ₹ 53,223 crore in 2023-34 to ₹ 59,626 crore in 2024-25 registering growth rate of 12.03 per cent which was higher than that of the GDP growth rate (9.78 per cent). Tertiary sector was the dominant force, followed by the Primary Sector and Secondary Sector.
During 2024-25, Revenue Receipts stood at ₹ 17,153.91 crore and its growth did not kept pace with the GSDP. The higher revenue buoyancy ratios in 2021-22 and 2023-24 was mainly due to higher Central transfers.
Further, the State's Own Revenue persistently lagged behind the GSDP except in 2023-24 as indicated by low buoyancy ratios. This indicates that the State's revenue mobilisation did not keep pace with economic growth in general.
Against the Budget Estimate (BE) for non-tax revenue receipts during the year 2024-25, actual receipts achieved 64 per cent of BE but lower than the previous.
State's share in Union Taxes and Duties during 2024-25 increased from 2023-24 registering a growth of 14 per cent.
However, the state's Grants-in-Aid (GIA) from the Government of India in the current year 2024-25 was 40 per cent lower than the previous year. In fact, this was the lowest in the last five-year period.
The State's Capital Receipts in 2024-25 increased significantly by 72 per cent. Capital Receipts as a percentage of GSDP grew to 10 per cent in 2024-25 after hovering around 6.00 per cent during the previous years.
Out of the total expenditure of ₹ 22,359.89 crore incurred by the State during the financial year 2024-25, ₹ 3,185.58 crore pertained to pass-through transactions.
During 2024-25, Revenue expenditure remained marginally lower than the Revenue receipts. Further, its growth rate remained below that of GSDP and it constituted 76 per cent of the total expenditure down from 86 per cent in 2020-21.
Committed expenditure accounted for 56 per cent of the Revenue expenditure. Shares of committed expenditure as well as subsidies in Revenue expenditure as well as total expenditure rose significantly over the previous year 2023-24.
Though Government of Meghalaya enacted the Meghalaya State Finance Commission Act, 2012, the State Government has not constituted the State Finance Commission (December 2025).
As of 31 March 2025, the State Government's investment in companies, corporations and other bodies stood at ₹ 4,444.43 crore. During 2024-25, the return on investment was meagre ₹ 0.20 crore (0.005 per cent) lower than the average rate of interest paid by the State Government on its borrowings.
In the year 2024-25, the State recorded revenue surplus of ₹ 72.71 crore. However, Audit found that this surplus was overstated by ₹ 125.40 crore due to misclassification of Revenue expenditure as Capital expenditure. This results in post Audit revenue deficit of ₹ 52.69 crore which is not in compliance with the target of maintaining revenue surplus set under the MFRBM Act, 2006 as amended. During the last ten years from 2015-16 to 2024-25, the State witnessed revenue deficit in the years 2018-19, 2019-20, 2020-21, 2022-23 and 2024-25 which saw either subdued growth or decline in Revenue receipts compounded by higher committed expenditure and increased subsidies.
Post Audit Fiscal deficit stood at ₹ 5,184.01 crore i.e., 8.69 per cent of GSDP, which was not in compliance with the target for the year under MFRBM Act. Throughout the five-year period from 2020-21 to 2024-25, MFRBM Act, 2006 was never achieved.
Over the past ten years, the target for outstanding liabilities-GSDP ratio (28.00 per cent) set by MFRBM Act, was never achieved in the last ten years.
During the period from 2020-21 to 2024-25, the last four years witnessed net reduction of guarantees as the reduction in outstanding guarantees exceeded addition of fresh guarantees. This reflects efforts to avoid accumulation of guarantees.
The cumulative value of the un-discharged liabilities which include off budget borrowings, amounted to ₹ 406.39 crore, which is equivalent to 0.68 per cent of the GSDP and 7.84 per cent of the Fiscal Deficit for the year 2024-25. Out of off-budget borrowings of ₹ 115.66 crore at the start of the year, ₹ 6.43 crore was repaid in 2024-25 resulting in outstanding off budget borrowing of ₹ 109.20 crore.
The State enacted Meghalaya Ceiling on Government Guarantees Act, 2025 which prescribes ceilings on total outstanding government guarantees and total fresh Government guarantees issued in a year.