The Comptroller and Auditor General of India (CAG) released a landmark decadal report revealing that the combined public debt of Indian states nearly trebled from ₹17.57 lakh crore in 2012-13 to ₹59.60 lakh crore in 2022-23 — a 239% increase over a decade. The report, covering 28 states, flags alarming debt sustainability trends that pose serious risks to fiscal federalism. Punjab emerged as the most fiscally stressed state, with public debt reaching 40.35% of its Gross State Domestic Product (GSDP), far exceeding the FRBM-recommended threshold of 25% of GSDP. The report identifies 11 states that are borrowing to meet revenue expenditure — including salaries, pensions, and subsidies — rather than capital investment in infrastructure. This structural imbalance undermines the productivity of borrowed funds and creates debt traps. Among the key findings: states have increasingly relied on off-budget borrowings through state-owned enterprises and special purpose vehicles, masking the true extent of fiscal stress. The report recommends strict enforcement of Fiscal Responsibility and Budget Management (FRBM) norms, transparent reporting of contingent liabilities, and linking central transfers to fiscal consolidation milestones. The CAG also raised concerns about the quality of capex — finding that a significant portion of reported capital expenditure represents loans to state-owned entities rather than direct asset creation. The report is especially significant for RPSC aspirants as it touches on GST revenue sharing, Finance Commission devolution, and the structural challenges facing cooperative federalism in India.