What is the use of static variable in C#? When to use it? Why can't I declare the static variable inside method?

A static variable shares the value of it among all instances of the class.

Example without declaring it static:

public class Variable
{
    public int i = 5;
    public void test()
    {
        i = i + 5;
        Console.WriteLine(i);
    }
}


public class Exercise
{
    static void Main()
    {
        Variable var = new Variable();
        var.test();
        Variable var1 = new Variable();
        var1.test();
        Console.ReadKey();
    }
}

Explanation: If you look at the above example, I just declare the int variable. When I run this code the output will be 10 and 10. Its simple.

Now let's look at the static variable here; I am declaring the variable as a static.

Example with static variable:

public class Variable
{
    public static int i = 5;
    public void test()
    {
        i = i + 5;
        Console.WriteLine(i);
    }
}


public class Exercise
{
    static void Main()
    {
        Variable var = new Variable();
        var.test();
        Variable var1 = new Variable();
        var1.test();
        Console.ReadKey();
    }
}

Now when I run above code, the output will be 10 and 15. So the static variable value is shared among all instances of that class.

C# doesn't support static local variables (that is, variables that are declared in method scope).

https://docs.microsoft.com/en-us/dotnet/csharp/programming-guide/classes-and-structs/static-classes-and-static-class-members#static-members

You can declare static fields (class members) though.

Reasoning: Static field is a state, shared with all instances of particular type. Hence, the scope of the static field is entire type. That's why you can't declare static instance variable (within a method) - method is a scope itself, and items declared in a method must be inaccessible over the method's border.