Sikkim’s fiscal health came under increasing pressure in 2024-25 as its fiscal deficit breached statutory limits, public debt edged above the prescribed ceiling, and off-budget liabilities crossed Rs 1,295 crore, even as the Himalayan state recorded double-digit economic growth and maintained a revenue surplus, according to the latest report of the Comptroller and Auditor General (CAG).
The State Finances Audit Report for 2024-25 said Sikkim’s Gross State Domestic Product (GSDP) expanded by 11.15% to Rs 53,340 crore, while per capita income rose to Rs 6.46 lakh, more than three times the national average of Rs 2.05 lakh.
The state’s economy has grown at a compound annual growth rate (CAGR) of 12.74% over the past five years, with manufacturing and other secondary-sector activities driving much of the expansion.
Despite the robust growth, the audit warned that the state’s fiscal position weakened during the year.
The fiscal deficit widened to Rs 2,980 crore, equivalent to 5.59% of GSDP, substantially exceeding the 3% ceiling prescribed under the Fiscal Responsibility and Budget Management (FRBM) framework. Public debt also rose to 28.09% of GSDP, marginally breaching the 28% threshold.
At the same time, undischarged liabilities—including off-budget borrowings, unpaid interest obligations and short transfers to the National Pension System (NPS)—reached Rs 1,295.42 crore, representing 10.42% of the state’s total expenditure of Rs 12,431.62 crore.
The report noted that while the government continued to generate a revenue surplus of Rs 482.43 crore, indicating that recurring revenues exceeded day-to-day expenditure, heavy borrowing was required to finance capital spending and other obligations. Total expenditure stood at Rs 12,431.62 crore against total receipts of Rs 12,454.46 crore during the year.
Revenue rises, but dependence on Centre continues
Revenue receipts increased by 13.17% year-on-year to Rs 9,451.25 crore, driven primarily by stronger Goods and Services Tax (GST) collections and a higher share in central taxes.
Tax revenue increased to Rs 6,904.97 crore, while the state’s share of Union taxes climbed to Rs 5,090.10 crore, accounting for more than half of total revenue receipts.
However, Sikkim’s own revenue base remained relatively modest. State tax and non-tax revenues together amounted to Rs 2,724.92 crore, compared with central grants of Rs 1,636.23 crore, underscoring the state’s continued dependence on transfers from New Delhi. Growth in the state’s own revenue slowed to 3.9%, significantly below the pace of GSDP expansion.
Among state taxes, State GST remained the largest contributor at Rs 970.14 crore, followed by State Excise collections of Rs 506.18 crore. Vehicle taxes rose to Rs 76.27 crore, while revenue from taxes on sales and trade fell sharply to Rs 146.65 crore from Rs 238.19 crore in the previous year.
The audit found significant deviations between budget estimates and actual outcomes.
Against budgeted revenue receipts of Rs 10,749 crore, the government realised only Rs 9,451 crore, achieving 87.9% of its target. Grants-in-aid recorded the largest shortfall, with actual receipts of Rs 1,636 crore, just 58% of the budget estimate.
Revenue expenditure reached Rs 8,968.82 crore, while capital expenditure amounted to Rs 3,462.80 crore, slightly exceeding the original budget estimate but remaining below the revised estimate.
The CAG observed that committed expenditure—including salaries, pensions and interest payments—accounted for 73.4% of revenue expenditure, leaving limited fiscal space for developmental and infrastructure spending. Interest payments alone increased to Rs 948.59 crore during the year.
Sikkim’s total liabilities increased by 18.2% during the year to Rs 28,438 crore.
Internal debt rose by 14.5% to Rs 12,704 crore, while loans and advances from the Government of India almost doubled to Rs 3,667 crore. Reserve funds expanded by nearly 40%, and cash balances increased by almost 34%. Gross capital assets also grew by 16.4% to Rs 24,530 crore.
Beyond fiscal indicators, the audit flagged several governance and financial reporting issues.
The report said off-budget borrowings diluted budget transparency, while revenue from the sale of electricity was maintained outside government accounts, violating the provisions of Article 266 of the Constitution.
The CAG also pointed to delays in the submission of utilisation certificates dating back to 2002-03, pending accounts of autonomous bodies, the continued use of Minor Head 800 for recording receipts and expenditure, and Rs 16.82 crore in excess expenditure from earlier financial years that remains to be regularised by the legislature.
The audit nevertheless highlighted several positive developments.
The state maintained a revenue surplus for another year, strengthened the implementation of the Single Nodal Agency (SNA) mechanism for centrally sponsored schemes, improved fund tracking through SNA-SPARSH, and registered sustained growth in capital expenditure over the past five years. Sikkim’s contribution to India’s GDP also increased from 0.24% five years ago to 0.28% in 2024-25.
However, the auditor concluded that rising debt, increasing committed expenditure and continued reliance on borrowings pose growing risks to fiscal sustainability.
It recommended augmenting the state’s own revenues, exercising tighter expenditure controls, improving transparency in off-budget financing, and adopting more realistic budget projections to ensure long-term fiscal stability.
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