Centre releases 2 instalments of tax devolution worth Rs 1.17 lakh crore to states

The Union government, on November 10, said it had released Rs 1.17 lakh crore to states as tax devolution - double the Rs 58,333 crore it would have normally transferred in a single month.

"This in line with the commitment of Government of India to strengthen the hands of States to accelerate their capital and developmental expenditure," the finance ministry said in a statement.

This is the second time in FY23 that the Centre has transferred two instalments of tax devolution to state governments in the same month, with the previous occasion being in August.

The Centre releases 14 instalments of tax devolution to states every year. As such, this involves two months where the instalment is double of the usual monthly amount. However, these double-instalment months normally occur at the end of the financial year after the central government has greater clarity regarding its finances.

But with the Centre's finances being in a better position than was budgeted, FY22 saw the extra instalments being released in November 2021 and January 2022. More money was transferred to states in February and March, with the Centre's total transfers to states amounting to Rs 8.83 lakh crore in the last financial year - over Rs 2 lakh crore more than what was initially budgeted.

For FY23, economists expect the Centre's tax devolution to states to again exceed the budget estimate, which stands at Rs 8.17 lakh crore.

According to latest data from the Controller General of Accounts, the Centre had released Rs 3.76 lakh crore to states in the first half of FY23. Assuming the Centre transferred Rs 58,333 crore in October - data for which will be released at the end of November - today's double instalment of tax devolution takes the total transfer to states in April-November to Rs 5.51 lakh crore. This amounts to just over two-thirds of the budget estimate for the full-year.