Chief Economic Advisor (CEA) V. Anantha Nageswaran addresses the media at National Media Centre, in New Delhi on January 31, 2025
| Photo Credit: Sushil Kumar Verma
Chief Economic Advisor (CEA) V. Anantha Nageswaran in the Economic Survey tabled on Friday (January 31, 2025) observed that the Union Government’s indicators for determining fiscal discipline have improved “progressively”. Additionally, the CEA also noted that the overall tax revenue position of State governments appeared better as of November last year. This was on account of increased tax devolution by the central government.
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Ample room for developmental and capital expenditure for rest of the year
On the aspect of improving fiscal disciple, the CEA elaborated that the quality of expenditure of the union has continuously improved since financial year 2021. Furthermore, Mr. Nageswaran observed that deficit indicators (metrics to analyse if a sovereign is spending more than revenues earned) of the union government were “comfortably placed”, thus, “leaving ample room” for developmental and capital expenditure for the remainder of the year.
Mr. Nageswaran noted that capital expenditure remained subdued in the first quarter of FY 2025 owing to general elections. However, capex witnessed a rebound in July owing to an increase in the devolution of taxes to states. Significantly, this was notwithstanding a reduction in non-debt receipts (those that do not generate any future liabilities). “Until November 2024, defence, railways and road transport accounted for about 75% of the capital expenditure, whereas significant YoY growth occurred in power, food and public distribution,” the CEA noted in the survey.
However, the CEA held, despite an observed 10.7% year-on-year increase in gross tax revenues during the mentioned period: the tax revenues retained by the Union, net of devolution to the states, hardly increased. “This was because of increased tax devolution which helped the states manage their expenditures smoothly,” he explained.
Own tax revenue collections improved for states
Having reviewed the unaudited estimates of 27 states for the period between April and November 2024, the CEA inferred that the gross tax revenue of the union and own tax revenue (OTR), that is self-earned revenue of states from state GST, state excise, taxes on vehicles, stamp duty and registration fees – increased at a “comparable pace” during the period. Among the state-specific taxes, as noted by the CEA in the Economic Survey, stamps, registration, state excise duties and other taxes and duties registered a “positive” growth with land revenues registering a decline.
Mr. Nageswaran further added that overall tax revenue position was further augmented because of increased tax devolution by the Union.
Telangana highest own tax revenue at 88%
Telangana accounted the highest OTR, among other tax receipts, at 88% followed by Karnataka and Haryana at 86% each.
The CEA, in the latest survey, also observed, “State with a higher ratio of own revenue receipts (ORR) to total revenue receipts also tended to have relatively lower ratios of revenue deficit to total revenue receipts”.
Maharashtra, Tamil Nadu and West Bengal gathered highest shares from their own respective ORRs including stamps and registration, sales tax and state excise duties, respectively. Odisha exhibited the highest share of non-tax revenue in ORR at 49%.
OTR accounted for more than half of the total tax receipts for fifteen states and GST as the main source of receipts (among other revenue receipts) for 23 states. Meghalaya and Nagaland were the states with greatest reliance on GST as the main source of revenue (amongst ORR) at 78% and 72% respectively.
Published – January 31, 2025 05:22 pm IST
