Top 18 Indian states to record revenue growth of 6-8% in FY24: CRISIL

India's top 18 states, which account for 90 per cent of aggregate gross state domestic product, are expected to see revenue growth of 6 to 8 per cent in 2023-24 (FY24), rating agency CRISIL said on Wednesday. Cumulatively, these states are expected to garner Rs 34 trillion in FY24.

The growth will be predominantly supported by the Goods and Services Tax (GST) collections, devolutions from the Centre and taxes & duties on liquor sales. These three will account for 55 to 60 per cent of the aggregate state revenue.

Anuj Sethi, senior director at CRISIL Ratings, "Though growth in aggregate state GST collection will moderate from about 20 per cent on-year last fiscal to 12-14 per cent this fiscal, it will still remain the biggest driver of revenue growth. This will be supported by the resilience of the Indian economy amid global turbulence, moderating inflationary environment, and increasing tax compliance."

 

The central tax devolutions will be the second main driver. While the Finance Commission determines the proportion, the overall kitty is linked with gross tax collections by the Centre.

"This pool, which expanded around 13 per cent on-year last fiscal, should grow around 10 per cent this fiscal," CRISIL said.

The third revenue driver, collections from liquor sales, will grow at 10 to 12 per cent, led by increasing consumption as most states have kept their tax structure unchanged.

It added that states' revenue from sales tax on motor fuel may increase only by a lower 6-8 per cent, driven primarily by steady demand for petroleum products, with only a handful of states having announced revisions in their tax structures for motor fuel in their budgets for fiscal 2024.

Also, the price of crude is expected to remain range bound between $80-85 per barrel this year.

"Among the other main reasons for the modest revenue growth overall, would be the marginal growth in grants from the Centre. This includes grants towards Centrally Sponsored Schemes and Finance Commission grants including those towards post-devolution revenue deficits, based on the budget calculations and Finance Commission stipulations. Also, GST compensation grants from the central government, at around Rs 0.9 trillion last fiscal, are no longer available this fiscal as the scheme ended effective June 30, 2022," said Aditya Jhaver, director at CRISIL Ratings.

CRISIL also said that India's real gross domestic product (GDP) growth rate would be at 6 per cent in FY24.