Revenues of top 18 states to grow 8 to 10% this financial year: CRISIL

Revenues of the top 18 states, which account for 90% of India's gross state domestic product, are projected to grow at a pace of 8 to 10% during the current financial year, reaching US$ 455.36 billion (Rs. 38 lakh crore), according to a CRISIL Ratings report. "Last fiscal, the revenues of the 18 states grew by 7%," the report stated. This growth will be primarily driven by robust GST collections and the devolution of finances from the Centre, which comprise around 50% of the aggregate state revenues. While revenue from liquor sales, which constitutes 10% of state revenues, is expected to remain stable, collections from sales tax imposed on petroleum products and grants recommended by the 15th Finance Commission will be modest.

Senior Director of CRISIL Ratings, Mr. Anuj Sethi, noted that the biggest impetus to revenue growth would continue to come from aggregate state GST collections, improved tax compliance, and greater formalization of the economy. Central tax devolutions are expected to grow by 12 to 13% in the current financial year, serving as an important driver. Grants from the Centre are projected to grow by 4 to 5%, which aligns with the budget outlay. CRISIL Ratings also mentioned that these calculations assume a real GDP growth forecast of 6.8% this financial year. States must focus on expanding their revenues and improving collection efficiencies to ensure sustainable revenue growth.

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