Revenue of states may grow a modest 7-9% this fiscal: CRISIL

Mumbai, Aug 24 : The revenue of the 17 states is likely to grow at a moderate pace of 7-9 per cent in this financial year, according to the ratings agency CRISIL.

The rise in revenue can be witnessed on back of healthy tax buoyancy, with Goods and Services Tax (GST) collections and devolutions from the Centre, together comprising 43-45 per cent of the states’ revenue, expected to show robust double-digit growth this fiscal.

The above mentioned India’s top 17 states, accounts for 85-90 per cent of aggregate gross state domestic product.

“The biggest impetus to revenue growth will come from aggregate state GST collections which had already rebounded 29 per cent on-year last fiscal. We expect this momentum to sustain and collections to further increase 20 per cent this fiscal, supported by better compliance levels, higher inflationary environment and steady economic growth,” said Anuj Sethi, Senior Director, CRISIL Ratings.

Additionally, the share of states in central taxes is expected to grow further. While the proportions are determined by the Finance Commission, the overall kitty is linked with the central government’s gross tax collections.

While, fuel collections for states from sales tax on motor fuel are expected to remain almost range bound. That’s because the effects of an expected 25 per cent on-year increase in crude price in the current fiscal and better sales volumes would be offset by the reduction in central excise on petrol and diesel in November 2021 and May 2022, followed by a reduction in sales tax rates by some states.

Various grants provided by the Centre, including grants towards Centrally Sponsored Schemes, Finance Commission grants and revenue deficit, are likely to see only marginal growth this fiscal, based on the budget calculations and Finance Commission stipulations.