The Indian government injected a significant financial boost into the country’s states in October, releasing a total of ₹1.78 trillion as part of tax devolution. This sum includes a substantial advance installment of ₹89,086.50 crore, strategically timed to coincide with the festive season. This move aims to empower states with additional resources to accelerate capital spending and effectively finance their development and welfare programs.
The monthly release of tax devolution proceeds to states is a standard practice. However, the government deemed it prudent to issue an advance payment in anticipation of the festive season. This timely injection of funds is expected to stimulate consumer spending and further bolster economic activity.
Uttar Pradesh emerged as the top recipient, receiving ₹31,962 crore. Bihar followed closely with ₹17,921 crore, followed by Madhya Pradesh (₹13,987 crore), West Bengal (₹13,404 crore), Maharashtra (₹11,255 crore), Rajasthan (₹10,737 crore), Odisha (₹8,068 crore), Tamil Nadu (₹7,268 crore), Andhra Pradesh (₹7,211 crore), Karnataka (₹6,498 crore), and Gujarat (₹6,197 crore). On the other end of the spectrum, Goa, Sikkim, and Mizoram received the smallest allocations, receiving ₹688 crore, ₹691 crore, and ₹891 crore, respectively.
While India’s GDP growth moderated to 6.7% year-on-year in the April-June quarter, down from 7.8% in the preceding quarter, the finance ministry’s Economic Review for August indicates an optimistic outlook for the subsequent quarters. This optimism is fueled by the anticipated increase in public spending, which is projected to stimulate investment and strengthen the rural economy. Furthermore, rural incomes and demand are expected to improve, and food inflation is forecast to moderate in the coming months, barring any unforeseen climate-related disruptions.
Finance Minister Nirmala Sitharaman acknowledged the slowdown in economic growth during the first quarter of Fiscal Year 25 (FY25), attributing it to a subdued capital expenditure due to the general elections. However, she expressed confidence that economic growth will regain momentum in the subsequent quarters, propelled by an increase in government spending. The government’s strategic financial interventions, including the advance tax devolution payment and the anticipated increase in public spending, are aimed at stimulating economic activity and ensuring a robust and sustainable recovery.
