What 5 Years of CAGR Trends Really Tell Us

Budgets are usually discussed one year at a time. But governments don’t operate in single-year snapshots, they evolve through multi-year compounding trends. Looking at CAGR growth between FY 2020-21 and FY 2024-25 offers a far more reliable way to understand how India’s revenue engines and spending priorities have actually changed.

This piece focuses on what has consistently grown, what has slowed, and what has structurally declined, and why these patterns matter more than annual announcements.

Part 1: Revenue Growth - India’s Earnings Have Changed Shape

At a headline level, India’s revenue growth over the last five years has been strong.

But the composition of that growth reveals a much more interesting story.

1. Tax Revenues Remain the Core - But Not the Only Engine

Both income-linked taxes and GST have grown at strong low-to-mid-20% CAGR levels over the period.

This reflects a combination of:

• Higher nominal economic growth post-pandemic

• Improved compliance and digitisation

• A steadily expanding formal economy

Together, Income Tax and GST continue to form the backbone of India’s fiscal earning power.

2. Infrastructure - Linked Revenues Are Quietly Compounding

What stands out in the data is the strong CAGR in revenues linked to roads, bridges, railways, and communication services, in some cases growing faster than headline tax collections.

This suggests a gradual but meaningful shift. From viewing infrastructure purely as a cost centre, to using public assets more actively as revenue-generating platforms.

User charges, tolling, commercial utilisation, and service-based receipts are becoming a more visible part of India’s revenue mix, not suddenly, but steadily.

3. Petroleum and Customs Revenues Reflect Policy Sensitivity, Not Just Growth

Petroleum-related revenues and customs duties show moderate but uneven growth compared to income tax and GST.

The reason is structural. These revenues are highly sensitive to:

• Global commodity cycles

• Trade volumes

• Inflation management choices

In the post-2020 period, the government repeatedly chose to prioritise price stability over revenue maximisation, particularly during periods of fuel price volatility.

As a result, these streams remain important but they do not compound automatically with economic growth

They function more as policy levers than long-term growth engines.

4. The Decline in Union Excise Duties Is Intentional, Not Accidental

One data point often raises questions: the negative CAGR in Union Excise Duties between FY 2020-21 and FY 2024-25.

This decline is not due to GST implementation, GST had already stabilised well before this period. Instead, the driver is post-pandemic inflation management. After 2020, Central excise duties on fuel were repeatedly cut to soften retail price shocks. These cuts were only partially reversed, even as consumption recovered

In effect, excise duties were used as a shock absorber to protect households from inflation, rather than as a revenue-maximising tool.

As excise lacks automatic buoyancy (unlike GST or income tax), revenue declined over time despite economic recovery. Excise did not fail, it was repurposed.

Part 2: Expenditure Growth - Spending Is Becoming More Selective

On the spending side, CAGR analysis helps distinguish structural priorities from temporary spikes.

1. Transport Spending Leads the Pack

Transport-related expenditure shows the strongest and most consistent growth.

This reflects:

• A sustained belief in infrastructure-led productivity

• Multi-year project commitments

• Capex being treated as a growth enabler rather than a short-term stimulus

The consistency matters more than the absolute numbers.

2. Interest Payments: The Non-Negotiable Line Item

Interest payments continue to grow at a steady double-digit CAGR.

This is not discretionary spending. It is the cost of accumulated borrowing.

As revenues grow, interest remains one of the largest claims on incremental resources, a reminder that fiscal flexibility is ultimately constrained by balance-sheet realities.

3. Defence, Police, and Science Spending Signal Stability

Expenditure on defence services, policing, and science & technology shows measured, predictable growth rather than sharp expansions.

This suggests medium-term planning discipline and fewer election-driven distortions. Institutional continuity in core state functions.

4. Social Sector Spending Shows Divergence

Education and health spending continue to grow, but at more moderate rates compared to transport and infrastructure.

At the same time, certain legacy expenditure heads, including housing, rural employment, and food storage, show declining CAGRs.

This reflects Pandemic-era spending normalising, Scheme consolidation. A gradual tilt toward asset creation over open-ended revenue support. Decline here does not automatically imply reduced importance, it often signals policy evolution.

* Disclaimer *

This article represents the author’s personal analysis and interpretation of publicly available budget data. The views expressed are for informational and educational purposes only and do not constitute financial, investment, legal, or policy advice.

No responsibility or liability is accepted for any loss or damage arising from reliance on this content.

Resources & Data Reference:

Annual Financial Statements of the Government of India (FY 2020-21 to FY 2024-25)

Budget documents as presented to Parliament

Aggregations and CAGR calculations performed by the author for analytical purposes