India’s major 18 states, which account for 90 percent of the country's output, are likely to see their revenue grow faster, between 8 and 10 percent, in FY25 to Rs 38 lakh crore, ratings agency Crisil said on July 3.
“The biggest impetus to revenue growth will continue to come from aggregate state GST collections that, after growing around 18 percent on-year last fiscal, will climb up another 13-14 percent in the current fiscal,” said Anuj Sethi, senior director, Crisil Ratings.
Indian states’ revenues grew 7.5 percent in the previous year.
Excise revenues would remain stable at 10 percent of the total revenue, with petrol sales raking in 7-8 percent and grants accounting for 10-11 percent, the report said.
Moneycontrol analysis found that the average excise duty to own tax revenue ratio for 19 of the largest states and UTs is expected to be 13.7 percent in FY24.
“Revenue from sales tax on petroleum products will grow a modest 3-4 percent on-year this fiscal after a flattish last fiscal. This will stem from higher fuel consumption driven by vehicular and industrial activity, even as the tax structure remains largely unchanged,” Crisil Ratings director Aditya Jhaver said.
Grants from the Centre are expected to grow 4-5 percent.
Crisil assumes the Indian economy to grow 6.8 percent this fiscal year.
“Volatility in the global economy and its impact on the economic activity can alter the revenue projections,” Crisil added.
There could also be an upside to revenue in case of better-than-expected tax buoyancy and higher support from the Centre, it said.
Moneycontrol analysis found that revenue collection of states has improved post introduction of the GST. Madhya Pradesh and Maharashtra lead the country in improvements to tax buoyancy post Covid.
Sustained growth would require states to improve their revenues and collection efficiencies.
Own tax revenues are set to increase at a slower pace of 9-10 percent to Rs 19.72 lakh crore from 10.5 percent in the previous year, it said.
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