Finance minister Nirmala Sitharaman on Monday said the Centre would release double the monthly amount of tax devolution to Rs 95,082 crore in November to enable the states to step up their capital expenditure and spur economic growth closer to the double digit in the current financial year.
The states were to be given Rs 47,541 crore in the month of November in line with the 15th finance commission’s formula of devolving 41 per cent of central taxes to the states, Sitharaman told reporters after a meeting with states chief ministers, finance ministers and lieutenant governor of union territories.
“The chief ministers requested that if part of tax devolution be front loaded, it would be helpful. I have directed the finance secretary to do this immediately. This is a very exceptional year. States should not be short of money in their hands when we are requesting states to push up their capital expenditure,” she said.
Finance secretary T V Somanathan said devolution to the states is done in 14 instalments. The difference between the budget estimates and the revised estimates is done in three instalments in March.
Sitharaman also disclosed that two states — Madhya Pradesh and Sikkim– asked for further relaxation of the fiscal responsibility and budget management (FRBM) Act. States are allowed to borrow from the market to the extent that it does not increase their fiscal deficit beyond three per cent of their respective gross state domestic product (GSDP). They have been given two per cent more relaxation in the current financial year, one per cent each with riders and unconditional.
She also said that the entire GST compensation to the states have been given in November itself. Somanathan said states have high cash balances at Rs 2.66 trillion as on October 30, but four states have negative cash balances.
He disclosed that 20 states spent 79 per cent higher capital expenditure during the first nine months of FY’22 year-on-year due to low base effect. However, this was also higher by 23 per cent compared to the corresponding period of pre-covid year of 2019-20.
20 states had an increase of 79 per cent during April and November, 23 per cent higher in the non-pandemic year, he said. The finance minister also said states also asked for better dispute resolution mechanisms post approval of projects, improving road connectivity among other issues.