Centre Doubles Nov Tax Devolution Amount For States After Discussion In FM’s Meeting On Economic Recovery

New Delhi: The Union government will release Rs 95,082 crore as tax devolution to the states this month after including one advance instalment to help them push their capital expenditure, Finance Minister Nirmala Sitharaman announced on Monday.

The announcement came after Nirmala Sitharaman chaired a meeting with chief ministers and state finance ministers to discuss ways to create a reform-focused business climate and further facilitate investments to help boost growth.

Speaking about the meeting, she informed that chief ministers of 15 states, Deputy chief ministers of three states, Jammu and Kashmir Lieutenant Governor Manoj Sinha, and finance ministers of other states participated in the meeting today.

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“Some of the chief ministers requested for increasing the states’ capital expenditure. They said it would be helpful for them to get a part of the tax devolution. I have directed the finance secretary to do this immediately”: Finance Minister Nirmala Sitharaman said, as reported by news agency ANI.

She informed that “I have suggested the Finance Secretary that on November 22 instead of normal Rs 47,541 crore, the states be given one more instalment. So Rs 95,082 crore will be given to states on November 22“, news agency PTI reported.

With this, states will have more money in their hands so that they can consider spending it for infrastructure creation, she added.

Currently, 41 per cent of the tax collected is devolved in 14 instalments and states have predictability of their cash flows, Finance Secretary TV Somanathan stated.

This is an advance release, and any adjustments will be made in March, he added.

Nirmala Sitharaman said that the context of the meeting was “after the second COVID wave we are seeing robust growth. However, it is also the time we are looking at ways to sustain growth and take it to double digits“.

“This meeting was essentially to seek ideas from states because in most of the issues related to investment development, and also for manufacturing and business activities, come in states domain,“ she added.

#WATCH | The reduction of Rs 5 (in petrol) & Rs 10 (in diesel) has been in the non-sharable portion of excise duty, which means entire loss is borne by Central Govt. There is no loss of devolution to any state govt through reduction in excise duty: Finance Secretary TV Somanathan pic.twitter.com/csthfGPruK

— ANI (@ANI) November 15, 2021

The important meeting comes in the backdrop of economic recovery after the two waves of COVID-19 pandemic, as the Union government pushes to increase capital expenditure. The Centre believes that there is scope to capitalise on the positive sentiment of the private sector, with increasing demand, amid lower non-performing assets and banks willing to lend more, PTI reported.

After a slowdown in economic growth due to the COVID-19 pandemic, the first quarter of the current fiscal has seen a pickup in economic activity. Indian economy contracted 7.3 per cent in the last financial year after a 4 per cent growth in 2019-20.

In the April-June quarter of the current fiscal, the economy grew 20.1 per cent. Besides, the first four months of FY 2021-22 have witnessed Foreign Direct Investment (FDI) of USD 64 billion.

The IMF and World Bank peg India’s GDP growth at about 9.5 per cent and 8.3 per cent, respectively, projecting India as one of the fastest-growing economies.

(With Inputs From Agencies)