Revenue Disparity Among Indian States Remains Significant

Revenue Disparity Among Indian States Remains Significant

A recent report by the National Stock Exchange has revealed that revenue disparity among Indian states is still pronounced, with some states experiencing revenue growth in FY25 while others are facing declines. The report emphasizes that the inter-state revenue receipt gap is substantial, despite the central government projecting a 14.7 percent increase in revenue receipts.

According to the findings, most states have set conservative revenue growth targets compared to the Centre's optimistic forecast, with only a few states—Telangana, Karnataka, Jharkhand, and Uttar Pradesh—anticipating higher revenue growth. Conversely, several states in the eastern and northern regions, including Himachal Pradesh, Meghalaya, Assam, and Mizoram, have either planned for revenue contractions or minimal growth when compared to the revised estimates for FY24.

The report suggests that the slowdown in revenue receipts could hinder overall growth in FY25. Notably, India's revenue-to-GDP ratio remains lower than that of many other emerging markets. However, the report highlights a slight improvement in revenue collection performance, with the revenue receipts to Gross State Domestic Product (GSDP) ratio rising to 15.2 percent for a sample group of states, compared to an average of 14.8 percent over the past 12 years.

While this increase reflects better revenue management efforts, the significant disparities among states continue to pose challenges. States experiencing slower fiscal growth will need to implement reforms and policies aimed at enhancing their revenue generation to avoid further economic lag.