State Finances: Lower grants keep states’ revenue receipts growth muted
• We analyzed finances of 24 states governments (our sample states) for the first nine months of FY24. Our analysis shows that during Apr-Dec 2023, states’ total receipts recorded a growth of 12% YoY to INR 28.7tn, lower than the center’s receipt growth of 14% during the same period.
• Own Tax Revenue (OTR) grew 12% YoY to INR 13.3tn during Apr-Dec 2023. The main drivers of OTR growth during the period were SGST (up 17% YoY), stamps and registration (14% YoY) and state excise duty (11% YoY). Land revenues too grew 16% YoY although their share in OTR is quite small. Strong growth in stamps and registration and land revenue growth indicates robust real estate activity.
• Contrary to tax collection, there has been a sharp decline in sample states’ grants in aid contribution. During Apr-Dec 2023, grants-in-aid contracted 30% YoY to INR 2.5tn with the cessation of GST compensation cess.
• As a result, revenue receipts, which comprise of tax revenue, non-tax revenue and grants-in-aid grew just 7.5% YoY, less than half of the center’s revenue receipts growth of 15.4% during the same period.
• Total expenditure grew 12% YoY during Apr-Dec 2023 to INR 28.3tn while revex grew 9% YoY to reach INR 24.4tn. The growth in capex, on the other hand, was significantly higher at 36% YoY to reach INR 3.9tn.
• Interestingly, there is not much difference between states’ capex including and excluding loans from the center. During the said period, the center extended loans worth INR 0.9tn to states, up from INR 0.7tn in the corresponding period last year. Hence, excluding loans from the center, states’ capex growth stands at 38% YoY, a tad higher than capex growth including loans of 36% YoY.
• States’ combined fiscal deficit now stands at INR 5.4tn, up from INR 4.1tn recorded during the corresponding period last year. With this, fiscal deficit as a % of BE stands at 53%, sharply up from 43% during the corresponding period last year.Activate to view larger image,
