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

The growth will be primarily driven by robust GST collections and devolution of finances from the Centre according to the report

Revenues of top 18 states, which account for 90 per cent of India's gross state domestic product, are likely to grow at a pace of eight to 10 per cent during the current financial year at Rs 38 lakh crore, according to a CRISIL Ratings report.

"Last fiscal, the revenues of the 18 states grew by seven per cent," it said.

The growth will be primarily driven by robust GST collections and devolution of finances from the Centre, which comprise around 50 per cent of the aggregate state revenues, according to the report.

It said that while revenue on liquor sales, which is ten per cent of the states' revenues, is expected to remain stable, collections of sales tax imposed on petroleum products and grants recommended by the 15th Finance Commission will be modest.

 

Senior director of CRISIL Ratings Anuj Sethi said that the biggest impetus to revenue growth will continue to come from aggregate state GST collections and also from improved tax compliance and greater formalisation of the economy.

Central tax devolutions are expected to grow by 12 to 13 per cent in the current financial year which will be an important driver.

Grants from the Centre will grow by four to five per cent, which is in line with the Budget outlay.

CRISIL Ratings said that the calculations assume a real GDP growth forecast of 6.8 per cent this financial year. To ensure sustainable growth in revenue, states would have to focus on expanding own revenues and improving collection efficiencies.