Revenues of Top 18 Indian States Projected to Grow by 8% to 10% This Financial Year: CRISIL Report
Kolkata, July 3, 2024 – A recent report from CRISIL Ratings has highlighted an optimistic outlook for the revenues of India’s top 18 states, which collectively account for a substantial 90% of the country’s Gross State Domestic Product (GSDP). The report anticipates a revenue growth of 8% to 10% during the current financial year, projecting total revenues to reach approximately Rs 38 lakh crore.
Drivers of Revenue Growth
The report attributes this growth primarily to robust collections from the Goods and Services Tax (GST) and financial devolution from the central government. These central tax devolutions are projected to increase by 12% to 13% this financial year, serving as a critical component in boosting state revenues. According to the CRISIL report, around 50% of the aggregate revenues of these states stem from such central transfers.
Anuj Sethi, Senior Director at CRISIL Ratings, emphasized that the key drivers for revenue growth will continue to be the aggregate GST collections, which have benefited from improved tax compliance and the formalization of the economy. While revenue from liquor sales, making up about 10% of state revenues, is expected to remain stable, collections from sales tax on petroleum products and grants recommended by the 15th Finance Commission are expected to see only modest increases.
Expectations for Central Grants
In addition to GST collections and tax devolutions, grants from the Centre are expected to grow at a rate of 4% to 5%, which aligns with the overall Budget outlay. This growth in central grants will further support state funding amidst efforts to enhance local revenue systems.
Economic Context
The projections for state revenue growth are based on an anticipated real GDP growth rate of 6.8% for the financial year. CRISIL Ratings notes that for states to maintain a sustainable trajectory in revenue generation, it is imperative for them to focus on expanding their own revenue sources and improving tax collection efficiencies.
As states navigate through the complexities of fiscal management in the current economic landscape, the findings of the CRISIL report provide a guiding light, indicating a potential recovery and growth phase ahead.
Conclusion
The forecasted growth in revenues for the top 18 Indian states signals a positive trend for the regional economies that are pivotal for India’s overall economic health. As these states leverage strengthened GST mechanisms and enhanced compliance measures, a gradual recovery in state finances appears firmly within reach.
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First Published: July 3, 2024 | 4:27 PM IST
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