New Delhi [India], October 21 : The revenue disparity among Indian states continues to be significant, while some states have shown revenue growth in FY25 but others have reported a revenue contraction, highlighted a report by National Stock Exchange.
The report said "Inter-state disparity in terms of revenue receipts remains huge". It noted that while the central government has budgeted a 14.7 per cent growth in revenue receipts, many states have set more modest targets.
"In FY25BE, while the Centre budgeted 14.7 per cent growth in revenue receipts, most states have budgeted a lower growth except Telangana, Karnataka, Jharkhand and Uttar Pradesh" the report added.
The report highlighted that the states like Telangana, Karnataka, Jharkhand, and Uttar Pradesh have projected higher growth in revenue receipts.
On the other hand, several states, particularly in the eastern and northern regions of India, are showing signs of slower revenue growth. States like Himachal Pradesh, Meghalaya, Assam, and Mizoram have either budgeted a contraction or minimal growth in their revenue receipts when compared to the revised estimates of FY24.
"Thus, the moderation in revenue receipts is a likelihood of moderating growth in FY25" the report said.
Despite these variations, India's overall revenue to GDP ratio is still lower than that of most other emerging markets.
However, on a positive note, the revenue collection performance of states has improved over the years. For FY25, the revenue receipts to Gross State Domestic Product (GSDP) ratio for a sample group of states has risen to 15.2 per cent, up from an average of 14.8 per cent over the past 12 years.
This improvement, while modest, reflects better revenue management and collection efforts by states. However, the wide gap between states highlights the ongoing challenge of addressing inter-state disparities and ensuring more balanced growth across the country.
States with weaker fiscal growth will need to focus on reforms and policies that can help boost their revenue generation to avoid falling further behind.
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