Revenue in the major states is likely to grow at a moderate rate of 7-9% this fiscal year, after galloping 25% last year, according to a report by rating agency CRISIL Ratings.
This estimate took into account India’s top 17 states, which account for 85-90% of total gross state domestic product.
“However, due to the economic slowdown caused by the pandemic, last fiscal growth was on a flattish base of fiscal 2021,” it said.
Goods and Services Tax (GST) collections and devolutions payments from the Centre, which account for 43-45% of state revenue, are expected to show robust double-digit growth this fiscal, according to the rating agency.
“The aggregate state GST collections will provide the biggest impetus to revenue growth,” said Anuj Sethi, Senior Director at CRISIL Ratings.
“We expect this momentum to continue, with collections increasing by 20% this fiscal year, aided by improved compliance, a higher inflationary environment, and steady economic growth.”
Furthermore, the report predicted that the share of central taxes paid by states would increase further.
Fuel collections for states from sales tax on motor fuel, on the other hand, are expected to remain almost range bound – that is, relatively stable.
A decrease in the central excise on gasoline and diesel in November 2021 and May 2022, followed by a decrease in the sales tax rates in some states, would offset the effects of an anticipated 25% annual increase in crude prices and higher sales volumes.
