Guided story
The great Indian age gap: why your state’s budget will change as its people grow old
India’s richest states are going grey first, locking up their budgets in pensions and debt. The poorest states are still young but heavily reliant on central funds. This is the story of how thirty different demographic clocks are ticking, and why the window to prepare is closing fastest for those with the least money.
Why does India's greying look so lopsided on a map?
In 2011, no major Indian state had more than 15 per cent of its people aged over sixty years. The maps were uniformly pale. By 2026, Kerala and Tamil Nadu have crossed that threshold, turning dark. By 2036, more than half the states have become ageing societies, while the northern heartland, Bihar, Uttar Pradesh, Madhya Pradesh, Rajasthan, remain youthful or intermediate. The national share of 60-plus people rises from 8.4 per cent in 2011 to 14.9 per cent by 2036. But Kerala starts at 12.7 per cent and ends at 22.8 per cent; Bihar starts at 6.3 per cent and reaches only 10.9 per cent. The grey wave reaches the south and west first, and it reaches the poorest states last.
India is ageing, but not all at once
MoHFW 2020 projections (via RBI) · share of population aged 60 and above · 2011, 2026, 2036
India’s grey wave hits the south and west first, with over half the states becoming ageing societies by 2036, while the northern heartland stays youthful.
The maps show the share of people aged 60 and above across states in 2011, 2026, and 2036. In 2011, no state had more than 15% elderly. By 2026, Kerala and Tamil Nadu cross that threshold. By 2036, the southern and western states are mostly dark, while Bihar, Uttar Pradesh, and other northern states remain pale. The national share rises from 8.4% to 14.9%, but Kerala jumps from 12.7% to 22.8%, while Bihar moves from 6.3% to just 10.9%. The divergence is stark.
How many elderly does each hundred workers actually carry?
Ageing feels abstract until you count the number of elderly every working person must support. By 2026, in Kerala, every 100 people aged 15 to 59 years carry about thirty people above sixty. In Bihar, they carry about fourteen. The national average is about eighteen. This old-age dependency ratioold-age dependency ratioImagine a small town with 100 adults of working age and a number of elders above 60. The ratio is simply how many elders per 100 workers. If there are 20 elders, the ratio is 20. A higher ratio means more older people to care for, which can strain pensions, health services, and tax collections.It is the simplest way to measure how heavy the ageing burden will be on a state's budget and society. Across India, it already ranges from about 14 to 30. is the most direct measure of the pressure on a state’s finances: more elderly means more pensions, more health spending, and fewer working people to pay taxes.
How many elderly each 100 workers must support
MoHFW 2020 projections (via RBI) · population 60+ per 100 aged 15-59 · 2026
States shown in grey (Andaman and Nicobar Islands, Arunachal Pradesh, Chandigarh, Dadra and Nagar Haveli and Daman and Diu, Goa, Ladakh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura) were not covered by the survey sample, so no estimate exists for them. They are left uncoloured rather than counted as zero.
In 2026, Kerala’s working-age population supports about 30 elderly per 100, while Bihar supports only 14.
This choropleth displays the old-age dependency ratio in 2026: the number of people aged 60 and above per 100 people aged 15 to 59. Darker colours mean a heavier burden. Kerala stands out at about 30, nearly twice Bihar’s 14. The national average is about 18. The ratio matters because more elderly per worker means more pressure on pensions, health services, and social support. It is the most direct measure of how ageing will strain state budgets.
Who will age the fastest between now and 2036?
A state can be young today but racing towards old age. Tamil Nadu’s 60-plus share will rise by 10.2 percentage points between 2011 and 2036, the steepest climb. Kerala adds 10.1 points, West Bengal 9.7, Himachal Pradesh 9.2, Andhra Pradesh 8.8. These are among the states that already have the highest elderly shares, but some intermediate states like West Bengal are gaining speed. Pace matters because it decides how quickly a budget must pivot.
Where the grey wave rises fastest
MoHFW 2020 projections (via RBI) · rise in 60+ share, 2011 to 2036
Tamil Nadu’s elderly share will rise 10.2 percentage points by 2036, the steepest increase of any state.
This bar chart ranks states by the projected rise in the share of people aged 60 and above between 2011 and 2036. Tamil Nadu leads with a 10.2-point rise, followed by Kerala (10.1), West Bengal (9.7), Himachal Pradesh (9.2), and Andhra Pradesh (8.8). Even states that are not the oldest today, like West Bengal and Himachal Pradesh, are ageing rapidly. The speed of ageing matters because quicker transitions give governments less time to adjust their budgets and build needed infrastructure.
What if we put Kerala and Bihar on the same line?
Kerala in 2026 is roughly where Bihar will not be even by 2036. In 2011, Kerala’s 60-plus share was 12.7 per cent, close to the national average of 8.4 per cent; Bihar was a low 6.3 per cent. By 2036, Kerala reaches 22.8 per cent, a figure Bihar will not touch until well past mid-century. India’s average line sits between them, hiding the sharp divergence. The oldest state and the youngest state are a generation apart, but they share the same constitutional finance system.
A generation apart: Kerala and Bihar
MoHFW 2020 projections (via RBI) · share of population aged 60+, 2011-2036
Kerala · 2036 · latest point
Kerala’s 60+ share in 2026 is about where Bihar will not be even by 2036.
Three lines plot the elderly share from 2011 to 2036: Kerala (top), India (middle), Bihar (bottom). Kerala’s line starts at 12.7% and rises to 22.8%, while Bihar’s starts at 6.3% and reaches only 10.9%. The India line rises from 8.4% to 14.9%. The gap widens: by 2036, Kerala has double the proportion of elderly as Bihar. This single chart encapsulates India’s thirty-speed ageing.
Why do older states pay their own way while younger states lean on Delhi?
In 2023-24, the group of ageing states raised 62.1 per cent of their total revenue from their own taxes. The youthful states raised only 37.8 per cent. That gap has persisted for two decades: in 2000-01, the ageing states raised 67.1 per cent, the youthful 38.7 per cent. The ageing states are the fiscally self-reliant ones. They have deeper tax bases, more economic activity, and a larger formal sector. The youthful states, being poorer, depend far more on Delhi.
Older states pay their own way; younger states lean on Delhi
RBI e-STATES · own-tax revenue as a share of total revenue, by demographic group · 2000-01 to 2023-24
Ageing states · 2023 · latest point
In 2023-24, ageing states raised 62.1% of their revenue from own taxes, while youthful states raised only 37.8%.
This multi-line chart shows own-tax revenue as a share of total revenue for three demographic groups from 2000-01 to 2023-24. The ageing group (top) has hovered between 60% and 67%, ending at 62.1%. The intermediate group (middle) rose slightly to 56.6%. The youthful group (bottom) has stayed below 40%, ending at 37.8%. The older, richer states simply have deeper tax bases and less need for central support.
And what does the mirror image of transfer dependence look like?
Central transferscentral transfersWhen the central government shares its tax collections with states or gives grants for specific schemes, that money is called a central transfer. Much of it is decided by the Finance Commission, which tries to give more to poorer states so they can catch up.Younger, poorer states depend heavily on these transfers. It is not a failure, but it makes their budgets vulnerable to central decisions, and a falling share of own taxes can signal a fading fiscal capacity., the share of state revenue that comes from the Finance Commission’s tax devolution and grants, tell the same story in reverse. In 2023-24, youthful states received 56.1 per cent of their revenue from the Centre, up from 51.4 per cent in 2000-01. The ageing states received only 27 per cent, up slightly from 24.1 per cent. This is partly by design: the transfer system aims to equalise across rich and poor states. But it leaves the youthful states more exposed to central decisions and less in control of their own fiscal fate.
The mirror image: who depends on transfers
RBI e-STATES · central tax share + grants as a share of total revenue, by group · 2000-01 to 2023-24
Ageing states · 2023 · latest point
Youthful states get 56.1% of their revenue from central transfers, compared to 27% for ageing states.
This chart shows central transfers as a share of total revenue. The youthful group line (top) rises from 51.4% in 2000-01 to 56.1% in 2023-24. The ageing group (bottom) edges up from 24.1% to 27%. The intermediate group moves from 30% to 34.5%. Transfers include tax devolution and grants. For the poorest states, this dependence is not a failure but a lifeline, yet it also means their budgets are swayed by decisions in Delhi.
What does every single state’s tax effort look like over three decades?
Group averages hide individual dramas. This set of small charts, one for each major state, shows the own-tax share from 1990-91 to 2023-24. Some, like Telangana and Haryana, have steep climbs; others, like West Bengal, have seen declines. Bihar’s line stays stubbornly low, around 25 per cent. Kerala’s line is high but sliding from its peak. No two states have followed the same path, but the broad pattern endures: the richer and older a state is, the higher the share of its own taxes.
Every state's own-revenue effort, one panel each
RBI e-STATES · own-tax revenue as a share of total revenue · each state, 1990-91 to 2023-24
Each chart is one city, 1993–2023, auto-scaled to its own range so the trend is visible — read the slope, not the height. The big number is the 2023 value; the small coloured number is the change since the 1993s (red = warmer, blue = cooler). Colour of the line shows how high the 2023 value sits across all cities.
Behind the group averages, each state has its own story: some have strengthened their tax base, others have weakened.
A grid of small charts shows the own-tax share for 22 states from 1990-91 to 2023-24. Haryana and Telangana show sharp increases; Kerala, while high, has declined from its peak; Bihar remains very low; West Bengal has slipped over time. The y-axis is consistent across panels, so you can compare levels at a glance. The grid reveals the grit behind the group trends: no two states have navigated the fiscal and demographic pressures in the same way.
Is the self-reliance map the same as the ageing map?
Yes, nearly. A choropleth of own-tax share in 2023-24 shows a dark green belt running through the south and west, Karnataka, Tamil Nadu, Kerala, Maharashtra, Gujarat, while the northern and eastern states are pale. The map looks almost like the income map and the ageing map overlaid. The places that tax themselves the most are also the places that are greying the fastest.
The self-reliance map
RBI e-STATES · own-tax revenue as a share of total revenue · 2023-24
States shown in grey (Andaman and Nicobar Islands, Arunachal Pradesh, Chandigarh, Dadra and Nagar Haveli and Daman and Diu, Goa, Ladakh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura) were not covered by the survey sample, so no estimate exists for them. They are left uncoloured rather than counted as zero.
The own-tax share map in 2023-24 mirrors the income and ageing maps: the south and west are self-reliant.
This choropleth shows the own-tax share of each state in 2023-24. The darker green indicates a higher share of own taxes. The southern states, Maharashtra, Gujarat, and Haryana are dark; the northern and eastern states are light. The pattern is almost identical to the per-capita income map. Self-reliance in revenue aligns with higher economic prosperity, which also brings earlier ageing.
How rich is each state, actually?
The income map makes the story plain. Per-capita net state income in 2023-24 is about Rs 3.1 lakh in Tamil Nadu, Rs 2.8 lakh in Kerala, against Rs 62,000 in Bihar and Rs 97,000 in Uttar Pradesh. The richest states are four to five times richer than the poorest. And these are precisely the states that are ageing first. Wealth and grey hair have moved together in India, and that will shape the country’s public finances for decades.
How rich each state actually is
RBI Handbook of Statistics on Indian States · per-capita net state income (NSDP), current prices · 2023-24
States shown in grey (Andaman and Nicobar Islands, Arunachal Pradesh, Chandigarh, Dadra and Nagar Haveli and Daman and Diu, Goa, Gujarat, Ladakh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura) were not covered by the survey sample, so no estimate exists for them. They are left uncoloured rather than counted as zero.
Kerala and Tamil Nadu have per-capita incomes above Rs 2.5 lakh, while Bihar is around Rs 62,000.
The map colours states by per-capita net state income (NSDP divided by population) in 2023-24. Deep purple indicates the highest incomes. The southern states and Maharashtra are deep purple; the Hindi-belt and eastern states are pale. The gap is four to five times between the richest and the poorest. This income gap is the underlying driver of both demographic transition and fiscal capacity.
Do the ageing states tax their economies harder?
Measure against the size of the economy, and a surprise emerges. As a share of GSDPGSDPGross State Domestic Product: the total value of all goods and services produced within a state in a year. It is the state-level equivalent of India’s GDP. If a state were a country, GSDP would be its GDP.When we express spending or taxes as a percentage of GSDP, we can compare states of very different sizes on a neutral ground. It reveals whether a government is big or small relative to the economy it manages., the own-tax collection of the ageing group has drifted down from about 8 per cent in 2011-12 to about 6 to 7 per cent, while the youthful and intermediate groups have stayed between 6 and 7 per cent. All three groups now tax their economies at almost identical rates. The wide gap in the share of total revenue is not because the ageing states squeeze their people harder; it is because they receive far smaller central transfers. Their self-reliance is mainly the arithmetic of fewer transfers, not heavier taxation.
Everyone taxes their economy about the same
RBI e-STATES over GSDP (Handbook of Statistics on Indian States) · own-tax revenue as a share of state GDP · 2011-12 to 2023-24
Ageing states · 2023 · latest point
Despite the wide gap in own-tax share of budget, as a share of GSDP, all groups take about 6-7% of their economies.
This multi-line chart shows own-tax revenue as a percentage of GSDP from 2011-12 to 2023-24. The ageing group started around 8% and has drifted down to about 7%. The intermediate and youthful groups have remained between 6% and 7%. By 2023-24, the gap between the highest and lowest is less than a percentage point. The earlier large gap in own-tax share of the budget is not because ageing states tax harder; it is because their total revenue includes far fewer central transfers.
Which states run the biggest governments relative to their economies?
The youthful, poorer states spend the largest share of their state GDP on running their governments. In 2023-24, the youthful group spent about 17 per cent of GSDP on revenue expenditurerevenue expenditureDay-to-day running costs of the government: salaries, pensions, interest payments, subsidies, and maintenance of roads and buildings. It does not include spending on building new assets like bridges or dams (that’s capital expenditure).Most of the ageing squeeze shows up in revenue expenditure, because pensions and interest are paid from it. All the budget shares in this article are slices of revenue expenditure., while the intermediate and ageing groups both spent closer to 12 per cent. This is not because the poor states are profligate; it is largely because their economies are smaller and the central transfers they receive are large in relation to their own output. A big government relative to a small economy can still be a bare-bones government in absolute terms.
The poorest states run the biggest governments
RBI e-STATES over GSDP · revenue spending as a share of state GDP · 2011-12 to 2023-24
Youthful states · 2023 · latest point
Youthful states spend about 17% of their GSDP on revenue expenditure, compared to 12% in ageing states.
This chart shows revenue spending as a share of GSDP. The youthful group line sits highest, around 17% throughout. The ageing group line is lowest, around 12%, with the intermediate group in between. Because the youthful states have smaller economies, the same absolute sum appears large relative to GSDP. This does not mean they deliver more in absolute terms per person; quite the opposite, as the per-capita charts show.
How much government spending does each resident actually get?
Flip from shares to rupees per person, and the picture inverts. In 2023-24, total revenue spending per person was highest in the smaller hill states and special-category states, around Rs 45,000 to 60,000, but in the populous poor states, it was far lower. Bihar spent about Rs 15,000 per person, Uttar Pradesh about Rs 18,000. The ageing, richer states spent substantially more. A resident of Kerala gets roughly two to three times the government spending that a resident of Bihar gets, even before accounting for differences in salaries and prices.
How much government each citizen actually gets
RBI e-STATES per derived population · revenue spending per resident · 2023-24
Revenue spending per person ranges from about Rs 15,000 in Bihar to over Rs 60,000 in Himachal Pradesh.
Horizontal bars show total revenue expenditure per resident in 2023-24. Small hill states and special-category states top the list, thanks to large grants and small populations. At the bottom, the large poor states, Bihar and Uttar Pradesh, spend a fraction of that per person. This inversion, where the poorest states spend the least per person, highlights the limits of shares when the budgets themselves are tiny.
Why do similar budget shares hide vastly different rupees on health?
Health spending as a share of the budget is similar everywhere, about 5 per cent. But because total budgets differ enormously, the actual rupees per person vary wildly. In 2023-24, the richer states spent several times more per person on medical and public health than the poorer states. A person in Kerala or Tamil Nadu gets far more in health from the state government than a person in Bihar or Uttar Pradesh. The same slice of a larger pie yields a much bigger piece.
Same share of the budget, very different rupees
RBI e-STATES per derived population · medical and public-health spending per resident · 2023-24
A similar 5% budget share on health yields ten times more rupees per person in richer states than in poorer ones.
This chart shows per-capita medical and public-health spending in 2023-24. States like Himachal Pradesh, Kerala, and Tamil Nadu spend several times more per person than Bihar or Uttar Pradesh. The share of the budget devoted to health is similar (about 5%), but because total budgets differ enormously, the absolute amount per person varies dramatically.
How much of the running budget is already locked in?
As a state ages, more of its day-to-day spending is pre-committed. From 2000-01 to 2023-24, the youthful states cut the share of revenue expenditure going to interest and pensions from 28.8 per cent to 23.9 per cent. The ageing states, by contrast, have stayed stuck near a third, about 32 per cent. In Kerala, the committed share was about 37 per cent in 2023-24. For every rupee the state government spends on running itself, 37 paise are already pledged to past lenders and retired employees, leaving little room for new schools, health centres, or social transfers.
How much of the budget is already spoken for
RBI e-STATES · interest payments + pensions as a share of revenue expenditure, by group · 2000-01 to 2023-24
Ageing states · 2023 · latest point
In ageing states, about a third of revenue expenditure goes to interest and pensions, while youthful states have cut it to 23.9%.
This line chart tracks committed spending (interest plus pensions) as a share of revenue expenditure from 2000-01 to 2023-24. The ageing group line stays stubbornly near 32%. The youthful group line falls from 28.8% to 23.9%, gaining fiscal room. The intermediate group sits in between. This divergence means the ageing states are losing flexibility just when they need it most.
Where is the budget most pre-committed right now?
A map of committed spending in 2023-24 shows the highest shares in the old and indebted states. Punjab, with its legacy debt, lights up alongside Kerala, West Bengal, Himachal Pradesh, and Assam. These states, whether through past borrowing or past government hiring, have left their budgets rigid. In some, interest alone is a massive burden; in others, pensions are the weight.
Where the budget is most pre-committed
RBI e-STATES · interest + pensions as a share of revenue expenditure · 2023-24
States shown in grey (Andaman and Nicobar Islands, Arunachal Pradesh, Chandigarh, Dadra and Nagar Haveli and Daman and Diu, Goa, Ladakh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura) were not covered by the survey sample, so no estimate exists for them. They are left uncoloured rather than counted as zero.
Punjab, Kerala, West Bengal, Himachal Pradesh, and Assam show the highest committed spending shares in 2023-24.
This choropleth maps the share of revenue expenditure going to interest plus pensions in 2023-24. The darkest red states are a mix of older and more indebted states. Punjab’s high committed spending is driven by debt, Kerala’s by both pensions and interest, and West Bengal by legacy debt. The map shows that fiscal rigidity is not uniform; it clusters in the ageing and indebted states.
Do young states still put more money into schools?
Yes. In 2023-24, the youthful states spent about 18 per cent of their revenue budget on education, compared to about 15 per cent in the ageing states. This gap has persisted and even widened over two decades. It makes sense: young states have more children and thus a larger education need. However, a higher share does not guarantee more rupees per child, because the youthful states’ overall budgets are much smaller. The per-child spending could still be far less. This is where the demographic window offers a clear opportunity: invest while the cohort is large.
Young states still spend more on schooling
RBI e-STATES · education spending as a share of revenue expenditure, by group · 2000-01 to 2023-24
Youthful states · 2023 · latest point
Youthful states allocate about 18% of revenue spending to education, compared to 15% in ageing states.
This multi-line chart shows education’s share of revenue spending from 2000-01 to 2023-24. The youthful group line (top) stays at about 18%, while the ageing group (bottom) is around 15%. The gap has persisted. This reflects the young states’ higher proportion of school-age children. But because their total budgets are much smaller, the higher share may not translate into higher spending per child.
Do ageing states pour more into health?
Surprisingly, no. All three demographic groups spend only about 5 per cent of their revenue expenditure on medical and public health. The ageing states ran marginally ahead for most of the 2000s, but by 2023-24 the lines had converged, and the ageing group was in fact slightly the lowest. Health budgets serve all ages, and the real fiscal cost of an ageing population is not hospitals; it is pensions. This null result demonstrates that the immediate budget pressure from ageing shows up in committed expenditure, not in direct health outlays.
How much states spend on health
RBI e-STATES · medical and public-health spending as a share of revenue expenditure, by group · 2000-01 to 2023-24
Ageing states · 2023 · latest point
All groups spend about 5% of revenue expenditure on health, with the ageing group slightly the lowest in 2023-24.
This chart plots health spending as a share of revenue expenditure from 2000-01 to 2023-24. The three group lines jostle around 5%. During COVID-19, all jumped together. By 2023-24, they had reconverged, and the ageing group was marginally below the others. Demography barely moves the health budget share; the real fiscal cost of ageing is pensions, not hospitals.
Which states already see pensions eating their budget?
In 2023-24, pensions alone consumed about 22 per cent of revenue expenditure in Himachal Pradesh. Assam, Kerala, Punjab, and Uttarakhand also rank high. Today’s pension bill is a product of past government hiring and the defined-benefit Old Pension SchemeOld Pension Scheme (OPS)A defined-benefit pension scheme in which the government promises retired employees a fixed monthly amount, typically half of their last drawn salary, with adjustments for inflation. It increases long-term liabilities.Several Indian states have reverted to OPS from the newer contributory National Pension System, a political choice that will raise future pension bills. (OPS). Several states that had shifted to the contributory National Pension System (NPS) have reverted to OPS, a choice that will lock in higher future liabilities. The pension map is the clearest symptom of the ageing squeeze, and the OPS-NPS tug-of-war shows how political choices can magnify the demographic challenge.
Where pensions already eat the budget
RBI e-STATES · pensions as a share of revenue expenditure · 2023-24
Himachal Pradesh spends about 22% of its revenue budget on pensions alone.
This bar chart shows pension spending as a share of revenue expenditure in 2023-24. Himachal Pradesh tops the list at about 22%, followed by Assam, Kerala, Punjab, and Uttarakhand. The burden reflects past government hiring and the generosity of the Old Pension Scheme. Several states that had moved to the contributory National Pension System have reverted, a choice that will raise future liabilities.
How wide is the demographic window, really?
India’s old-age dependency ratio, the number of elderly per 100 working-age people, drifts up gently from 13.8 in 2011 to nearly 16 by 2021, then starts climbing faster, reaching 23 by 2036. The window to prepare is roughly one generation wide. The easiest fiscal years are the present. Every year from here, the support ratio rises, and the fiscal space narrows. This national line hides the fact that some states have already entered their steep climb, while others are still on the flat part.
The window is one generation wide
MoHFW 2020 projections (via RBI) · India's old-age dependency ratio · 2011-2036
2036 · latest point
India’s old-age dependency ratio rises from 13.8 elderly per 100 workers in 2011 to 23 in 2036, steepening after 2021.
A simple line chart shows the national old-age dependency ratio from 2011 to 2036. The line is fairly flat until around 2021, then turns upward sharply. From 13.8 in 2011, it reaches nearly 16 in 2021 and 23 in 2036. This trajectory means the demographic dividend period is closing. The easiest fiscal years, when the working-age population is large and the elderly are few, are right now.
Who strengthened their tax base while the window was open?
The final test for the states is whether they boosted their own-source revenue while their populations were still young. This chart shows the change in own-tax share between earlier and later periods. Some states, like Haryana and Telangana, have clearly strengthened their tax effort. Others, like West Bengal, have seen their own-tax share shrink. For the poorest youthful states, the period ahead is critical: they must build revenue capacity before their own age wave arrives. The divergence in past performance suggests that building fiscal muscle is a policy choice, not an automatic dividend.
Who built revenue muscle while the window was open
RBI e-STATES · change in own-tax share, first decade vs latest decade
Some states, like Haryana and Telangana, have strengthened their own-tax share; others like West Bengal have weakened.
This chart ranks states by the change in own-tax share between earlier and later periods. Positive bars show states that have increased their tax share, negative ones those that have declined. The details reveal which states used the demographic window to build fiscal capacity and which did not. For the youthful states, the next decade will be critical: they must strengthen their own revenues before their populations age.
How should you read these numbers?
The demographic projections are from the Technical Group on Population Projections (Ministry of Health and Family Welfare, 2020) as published by the RBI. They are estimates, not census counts. Fiscal data come from the RBI’s e-STATES database and its report State Finances: A Study of Budgets of 2025-26, covering 1990‑91 to 2023‑24 actuals. All comparisons expressed as a share of total revenue or revenue expenditure are internal shares, comparable across states. The GSDP and per‑person charts use data from the RBI Handbook of Statistics on Indian States 2024‑25, with population derived from NSDP divided by per‑capita income, an estimate. Figures run to 2023‑24, the latest actuals; 2024‑25 and 2025‑26 are budget estimates. Committed spending here means only interest plus pensions; salaries are not separated, so true rigidity is higher. States are grouped by their 2026 elderly share projections, and a large state can influence a group line. These simultaneous pressures are not proof of causation.
Plain English concepts
old-age dependency ratio
Imagine a small town with 100 adults of working age and a number of elders above 60. The ratio is simply how many elders per 100 workers. If there are 20 elders, the ratio is 20. A higher ratio means more older people to care for, which can strain pensions, health services, and tax collections.
It is the simplest way to measure how heavy the ageing burden will be on a state's budget and society. Across India, it already ranges from about 14 to 30.
committed spending
Think of it as the fixed monthly bills you cannot skip: rent, loan EMI, insurance. For a state, committed spending includes interest on past loans and pensions for retired government employees. These payments are contractually or legally hard to cut, unlike building a new road or hiring more teachers.
High committed spending means less room for building schools, hospitals, or starting new schemes. In this article, it is the key measure of budget rigidity.
own-tax revenue
Money a state government collects through its own taxes, like state GST, stamp duty on property sales, or state excise on liquor. It excludes any money received from the central government. It’s what the state earns from its own economic activity.
It signals a state's fiscal independence. Older, richer states raise a much larger share of their total money from their own taxes.
central transfers
When the central government shares its tax collections with states or gives grants for specific schemes, that money is called a central transfer. Much of it is decided by the Finance Commission, which tries to give more to poorer states so they can catch up.
Younger, poorer states depend heavily on these transfers. It is not a failure, but it makes their budgets vulnerable to central decisions, and a falling share of own taxes can signal a fading fiscal capacity.
GSDP
Gross State Domestic Product: the total value of all goods and services produced within a state in a year. It is the state-level equivalent of India’s GDP. If a state were a country, GSDP would be its GDP.
When we express spending or taxes as a percentage of GSDP, we can compare states of very different sizes on a neutral ground. It reveals whether a government is big or small relative to the economy it manages.
revenue expenditure
Day-to-day running costs of the government: salaries, pensions, interest payments, subsidies, and maintenance of roads and buildings. It does not include spending on building new assets like bridges or dams (that’s capital expenditure).
Most of the ageing squeeze shows up in revenue expenditure, because pensions and interest are paid from it. All the budget shares in this article are slices of revenue expenditure.
per-capita income
The average income earned per person in a state over a year. It is calculated by dividing the state's total income (Net State Domestic Product) by its population. It is a rough measure of how rich or poor the average resident is.
It reveals the deep income gap between the rapidly ageing rich states and the slowly ageing poor ones. This gap underlies the entire fiscal story.
Old Pension Scheme (OPS)
A defined-benefit pension scheme in which the government promises retired employees a fixed monthly amount, typically half of their last drawn salary, with adjustments for inflation. It increases long-term liabilities.
Several Indian states have reverted to OPS from the newer contributory National Pension System, a political choice that will raise future pension bills.