Aggregate subsidy spending by 20 major states is estimated at Rs 5.39 lakh crore in FY27, only marginally higher than the Rs 5.31 lakh crore spent in FY26. While Karnataka remains the biggest spender, Maharashtra and Tamil Nadu planned sharp cuts. Meanwhile, Uttar Pradesh and Rajasthan increased their subsidy budgets.
Aggregate subsidy expenditure by 20 major states is estimated at Rs 5.39 lakh crore in FY27, only marginally higher than the Rs 5.31 lakh crore spent in FY26. Over Rs 4.94 lakh crore was spent on this front in FY25.
The near-flat aggregate, however, masks substantial shifts in spending across states.
Karnataka remains the biggest spender, with its subsidy and financial assistance outlay projected to rise 9% to Rs 1.03 lakh crore in FY27. Tamil Nadu, the second-largest spender in FY26, has budgeted a 15.7% reduction to Rs 61,097 crore.
Maharashtra has planned an even sharper 19.1% cut to Rs 54,094 crore, down from Rs 66,882 crore in FY26, accounting for a substantial part of the restraint among larger spenders.
In contrast, Uttar Pradesh has budgeted a 56% increase to Rs 43,449 crore in FY27, while Rajasthan's outlay is projected to rise 21% to Rs 43,712 crore. Madhya Pradesh has provided for a 17.8% increase to Rs 49,762 crore, and Telangana a 24.4% rise to Rs 18,105 crore in FY27.
These increases suggest that subsidy commitments remain a significant spending priority in several states.
Some states have also sharply reduced allocations. Chhattisgarh's subsidy expenditure is budgeted to fall 32.2% to Rs 17,305 crore, while Bihar's is projected to decline 17.4% to Rs 18,055 crore in FY27.
The data need to be interpreted with caution, as budget estimates may also differ from actual expenditure.
A large part of subsidy expenditure reflects power-sector support, food-related assistance, farm subsidies and other welfare commitments, whose composition varies across states.
The states analysed are include Andhra Pradesh, Assam, Bihar, Chhattisgarh, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, Uttarakhand, West Bengal and Telangana.
State finances remain broadly stable, supported by contained fiscal deficits, improving expenditure quality and resilient own-tax revenues. However, rising expenditure pressures, limited revenue growth and high debt levels continue to pose challenges. Strengthening tax collections through a wider tax base and greater tax buoyancy, while prioritising productive sectors and improving spending efficiency, will be critical to ensuring the long-term sustainability of state finances.