New Delhi [India], Revenues of India's major states, which account for more than 90 percent of India's gross state domestic product, are likely to grow at a steady 8 to 10 percent in the current year financial 2024-25, according to an analysis by the rating agency Crisil Ratings.
The rating agency projected the revenue of major states to reach Rs 38 lakh crore. In the last fiscal year, 2023-24, revenue grew 7.5 percent.
The growth, according to the rating agency, will be mainly supported by the Centre's healthy Goods and Services Tax (GST) collections and refunds, which together account for 50 per cent of the aggregate state revenue.
While alcoholic beverage sales tax revenues (10 percent of total revenues) will remain stable, mid-single-digit growth in petroleum products sales tax collections (7-8 percent) and the subsidies recommended by the Fifteenth Finance Commission (10 percent-11 percent) will be modest, he projected.
"The biggest boost to revenue growth will continue to come from aggregate state GST collections which, after growing 18 per cent year-on-year in the last fiscal year, will rise another 13-14 per cent in the current fiscal year. This will be driven of the Indian economy to global turbulence, improved tax compliance and shift in economic activity from unorganized to organized sectors, leading to greater formalization of the economy," said Anuj Sethi, Senior Director, CRISIL Ratings.
Central tax refunds, which are expected to grow by 12-13 per cent this financial year, will be the second major factor.
While the proportion of rebate is determined by the Finance Commission, the general fund is linked to gross tax collection by the Centre. This fund, which expanded 19 per cent year-on-year in the last fiscal year, Crisil said, should also grow at a healthy pace in this fiscal year, supported by rising income tax and GST collections.
Taxes collected from liquor sales are expected to grow by 5 to 7 percent, primarily due to increased consumption. Most of the 18 states surveyed, barring Karnataka and Kerala, have kept their liquor tax structure unchanged.
"Petroleum products sales tax revenue will grow by a modest 3-4 percent year-on-year this fiscal year after a flat last fiscal year. This is due to higher fuel consumption driven by vehicular and industrial activity, even as The tax structure remains largely unchanged. "While consumption is expected to grow by 5 to 6 percent, the cuts in gasoline and diesel prices made in March will affect the growth of tax collections. sales by 200 basis points (basis points)," said Aditya Jhaver, director, CRISIL Ratings.
The Centre's grants are expected to grow by 4-5 per cent year-on-year, in line with the Union Budget outlay, including centrally sponsored schemes and Finance Commission grants. The calculations assume a real GDP growth forecast of 6.8 per cent for 2024-25.
However, the rating in a warning stated that volatility in the global economy and its impact on economic activity may alter revenue projections.
To ensure sustainable revenue growth, he suggested that states will have to focus on expanding their own revenues and improving collection efficiency.
The rating agency projected the revenue of major states to reach Rs 38 lakh crore. In the last fiscal year, 2023-24, revenue grew 7.5 percent.
The growth, according to the rating agency, will be mainly supported by the Centre's healthy Goods and Services Tax (GST) collections and refunds, which together account for 50 per cent of the aggregate state revenue.
While alcoholic beverage sales tax revenues (10 percent of total revenues) will remain stable, mid-single-digit growth in petroleum products sales tax collections (7-8 percent) and the subsidies recommended by the Fifteenth Finance Commission (10 percent-11 percent) will be modest, he projected.
"The biggest boost to revenue growth will continue to come from aggregate state GST collections which, after growing 18 per cent year-on-year in the last fiscal year, will rise another 13-14 per cent in the current fiscal year. This will be driven of the Indian economy to global turbulence, improved tax compliance and shift in economic activity from unorganized to organized sectors, leading to greater formalization of the economy," said Anuj Sethi, Senior Director, CRISIL Ratings.
Central tax refunds, which are expected to grow by 12-13 per cent this financial year, will be the second major factor.
While the proportion of rebate is determined by the Finance Commission, the general fund is linked to gross tax collection by the Centre. This fund, which expanded 19 per cent year-on-year in the last fiscal year, Crisil said, should also grow at a healthy pace in this fiscal year, supported by rising income tax and GST collections.
Taxes collected from liquor sales are expected to grow by 5 to 7 percent, primarily due to increased consumption. Most of the 18 states surveyed, barring Karnataka and Kerala, have kept their liquor tax structure unchanged.
"Petroleum products sales tax revenue will grow by a modest 3-4 percent year-on-year this fiscal year after a flat last fiscal year. This is due to higher fuel consumption driven by vehicular and industrial activity, even as The tax structure remains largely unchanged. "While consumption is expected to grow by 5 to 6 percent, the cuts in gasoline and diesel prices made in March will affect the growth of tax collections. sales by 200 basis points (basis points)," said Aditya Jhaver, director, CRISIL Ratings.
The Centre's grants are expected to grow by 4-5 per cent year-on-year, in line with the Union Budget outlay, including centrally sponsored schemes and Finance Commission grants. The calculations assume a real GDP growth forecast of 6.8 per cent for 2024-25.
However, the rating in a warning stated that volatility in the global economy and its impact on economic activity may alter revenue projections.
To ensure sustainable revenue growth, he suggested that states will have to focus on expanding their own revenues and improving collection efficiency.
