The Indian Central Government recently authorized the release of an additional ₹72,961.21 crore as a tax devolution to states. This action was taken over and above the standard 14 installments disbursed to states based on the recommendations of the 15th Finance Commission.
This significant financial move is aimed at enhancing the capabilities of state governments to fund various social welfare measures and infrastructure development schemes. It’s noteworthy that this additional allocation comes in light of the upcoming festivities and the New Year, symbolizing the government’s commitment to strengthening state resources during important periods.
Typically, the Centre disburses funds to states as part of tax devolution on the 10th of each month. However, in the past two years, there have been instances of advanced releases to support states in their fight against COVID-19 and to encourage capital spending.
The distribution of these funds is significant, with the highest installment of ₹13,088.51 crore allocated to Uttar Pradesh, followed by Bihar receiving ₹7,338 crore, and West Bengal ₹5,488.88 crore. On the lower end of the spectrum, states like Goa and Sikkim received smaller devolutions, amounting to ₹281 and ₹283 crore respectively.
The devolution of taxes collected by the Centre, which currently stands at 41% of the total taxes, is divided into 14 installments across a fiscal year. This decision aligns with the goals set by states for capital expenditure (capex), which for the current fiscal year, is targeted at ₹8.27 lakh crore. As of the end of October, about 40% of this target, roughly ₹3.24 lakh crore, had already been spent.
The Centre’s decision to allocate these additional funds demonstrates a focused effort to empower state governments in their development and welfare initiatives, ensuring a more balanced and holistic growth across the nation.