Sikkim’s fiscal health has come under increasing pressure in 2024-25, with its fiscal deficit breaching statutory limits, public debt edging above the prescribed ceiling, and off-budget liabilities crossing Rs 1,295 crore. Despite recording double-digit economic growth and maintaining a revenue surplus, the Himalayan state’s fiscal position weakened during the year, according to the latest report of the Comptroller and Auditor General (CAG).
The State Finances Audit Report for 2024-25 revealed that 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.
However, 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, heavy borrowing was required to finance capital spending and other obligations.
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. However, Sikkim’s own revenue base remained relatively modest, with state tax and non-tax revenues together amounting 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.
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. The audit flagged several governance and financial reporting issues, including off-budget borrowings diluting budget transparency and revenue from the sale of electricity being maintained outside government accounts.
The report 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. Despite highlighting several positive developments, the auditor concluded that rising debt, increasing committed expenditure, and continued reliance on borrowings pose growing risks to fiscal sustainability.
