Centre front-loads states’ share to boost spending
- FM said share in tax revenue has been given upfront so that states can increase capital expenditure
The Union government has frontloaded devolution of revenue to states by doubling the November instalment to ₹95,082 crore, and has that states’ revenue shares is not affected by the recent cut in central excise on petrol and diesel as the hit will be taken by the Centre, finance minister Nirmala Sitharaman told them at a meeting on Monday.
She said the money has been given upfront to states so that they can frontload their capital expenditure and give infrastructure push that would propel economic growth, which is already upbeat. “With this, states will have more money in their hands so that they can consider spending it for infrastructure creation,” she said.
This is an advance release, which will be adjusted in the month of March, the end of the current financial year, she added.
Sitharaman said that the meeting—first of its kind and convened less than 100 days before the Union Budget—aims to maintain a robust economic growth that has been witnessed post-pandemic.
“We need to sustain the growth,” she said, adding that the government wants to take it as close as possible to a double-digit growth.
India’s gross domestic product (GDP) saw a 24.4% contraction in the first quarter ended June 2020. The economy plunged into technical recession (negative growth for two subsequent quarters) as the subsequent quarter (Q2 FY21) contracted 7.3%.
The economy, however, recorded a V-shaped recovery as a result of several policy measures, including a ₹20.97 lakh crore stimulus package. That led to a positive 0.5% growth in the third quarter and 1.6% in the fourth quarter ended March 31, 2021.
The current fiscal year started with a record 20.1% expansion in the first quarter ended June 2021, signalling a strong revival in business activities.
On uniform pricing of petrol and diesel across the country, she said the decision on applicability of tax rates has to be taken by states in the Goods and Services Tax (GST) Council. Commenting on the impact of recent cuts in central excise on petrol and diesel, finance secretary TV Somanathan said: “Entire reduction is borne by central government ... it is revenue loss to the centre [alone] and no loss to devolution to the state government.”
Sitharaman said the meeting was essentially convened to seek ideas from states to further boost investments and manufacturing as states are in the “forefront” of business activities. She said states did make several observations related to the forthcoming budget, but there was no specific discussion on fund allocations. “In general, there were a lot of observations. No particular thing about the budget... There were a lot of discussions in general about so many things,” she said.
The meeting was attended by chief ministers of Assam, Chhattisgarh, Goa, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Tripura, and Uttar Pradesh. Deputy chief ministers of Arunachal Pradesh, Bihar, and Delhi also attended the meeting.