Tax revenue down, expenditure up: Himachal’s fiscal deficit widens to over Rs 12,000 crore

Himachal Pradesh has projected a significant rise in its fiscal deficit — expected at Rs 12,114 crore, which is 4.74 per cent of GSDP — for financial year 2025-2026 citing reduced tax receipts, procedural delays and increased expenditure on subsidies and centrally sponsored schemes.

As per the fiscal statement tabled in the House on the last day of the winter session on Friday by Chief Minister Sukhvinder Singh Sukhu, who also holds the portfolio of the Finance Department, the total fiscal deficit for the ongoing financial year is expected at Rs 12,114 crore, up from Rs 10,337.97 crore as mentioned in the Budget estimates.

The tax revenue is also expected to decline by Rs 1,726.55 crore. This fall is attributed mainly to lower receipts from state GST, land revenue and state excise. The State Goods and Services Tax collections are likely to drop following the GST Council’s 56th meeting, which abolished the 12 per cent and 28 per cent slabs and introduced a 40 per cent slab for sin goods with effect from September 22.

Additionally, the state does not expect Rs 1,000 crore in land revenue due to procedural delays in assessments under the Himachal Pradesh Land Revenue (Amendment) Act, 2025.

Overall, the government anticipates a revenue deficit of Rs 7,434.92 crore, which is Rs 1,044.85 crore higher than the Budget estimates. The rising expenditure on subsidies, grants-in-aid, the HIMCARE scheme and compliance with court orders have contributed to the increase.

However, the non-tax revenue is projected to remain in line with budget estimates. The grants under centrally sponsored schemes are expected to increase to Rs 1,662.73 crore from Rs 1,278.60 crore as projected in the Budget estimates. As such, the state’s share is expected to increase by Rs 352.81 crore, putting an extra burden on the state exchequer. It is mainly due to receipt of more funds for Pradhan Mantri Gram Sadak Yojna, Pradhan Mantri Krishi Sinchai Yojna, establishment of new nursing colleges and upgrade of government medical colleges, NDRF, Pradhan Mantri Awas Yojna, MNREGA, compensation to Renuka Ji dam oustees, National Ayush Mission etc.

The capital outlay under state schemes will also go up by Rs 337.47 crore, mainly for rural water supply, roads, PMGSY state share and court-directed payments in arbitration and compensation cases.

The other capital expenditure will increase by Rs 40.9 crore, largely due to AFD-funded hydropower projects.

Keeping in view this scenario of the state’s finances, the total fiscal deficit is expected at Rs 12,114 crore as compared to the Budget estimates of Rs 10,337.97 crore, which is up by Rs 1,776.03 crore, amounting to 4.74 per cent of the GSDP.

At the same time, the primary deficit is projected to widen from Rs 3,599.12 crore to Rs 5,375.15 crore.

The government has noted that Himachal Pradesh, being a hill state, remains heavily dependent on Revenue Deficit Grants. However, the 15th Finance Commission has cut the grant for this financial year by Rs 3,000 crore as compared to the last financial year. The increasing losses in natural disasters have also impacted revenue mobilisation.

Despite these challenges, CM Sukhvinder Singh Sukhu said he was trying to augment resources through the Sadhbhawana Legacy Cases Resolution Scheme 2025 (Phase-II) and new cesses because some committed liabilities and decretal amounts awarded by courts have also added a financial burden on the government.