Centre releases US$ 21.20 billion (Rs. 1.78 trillion) advance for states ahead of festive season

The government has released US$ 21.20 billion (Rs. 1.78 trillion) to states in tax devolution, including an advance installment of US$ 10.61 billion (Rs. 89,086.50 crore), to support capital spending in light of the upcoming festive season, according to a statement from the finance ministry. This release includes one advance installment in addition to the regular installment scheduled for October 2024. The aim is to enable states to enhance capital spending and fund development and welfare-related expenditures. The state-wise breakdown reveals that Uttar Pradesh receives the highest devolution at over. US$ 3.69 billion (31,000 crore), followed by Madhya Pradesh and West Bengal with US$ 1.67 billion (Rs. 13,987 crore) and US$ 1.60 billion (Rs. 13,404 crore), respectively. Provisional estimates for FY24 indicate that states will maintain a 32.6% share of central taxes.

In absolute terms, the budget estimate for FY25 reflects an increase in the amount devolved to states, rising from US$ 134.59 billion (Rs. 11.3 trillion) to US$ 148.88 billion (Rs. 12.5 trillion). According to norms, funds from the divisible tax pool are allocated to states in 14 annual installments: 11 in the first 11 months and 3 in March. The government is projected to share approximately 32.5% of central taxes with states in FY25, lower than the 15th Finance Commission's recommendation of 41%. The reduced share is attributed to cess and surcharges imposed by the Centre, which are not distributed to states. States have frequently expressed concerns regarding the lower devolution compared to the Finance Commission's recommendations.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.