Finance minister Nirmala Sitharaman on Monday agreed to transfer tax revenues due to states a month in advance to help ramp up infrastructure spending and boost economic growth. This was decided at a virtual meeting attended by 15 chief ministers, three deputy chief ministers, lieutenant governors of Union Territories, and state finance ministers. The finance minister called the meeting to brainstorm on ways to push India’s economic growth towards double digits. “After the second wave, we are seeing robust growth. We are, however, seeking ideas to take growth as close as possible to double digits. For this, both states and the Centre have to work closely. We also sought ideas from states on how to accelerate investment and manufacturing activities," Sitharaman told reporters after the meeting.
Speaking about the demands and issues raised by states, Sitharaman said some states sought approvals for projects, better dispute resolution mechanisms after the award of contracts, and improved road connectivity. “North-East states sought help for immediate job creation and international trade policies for the region. Need for a policy for offshore wind energy generation was also highlighted in the meeting," Sitharaman said.
Sitharaman said that while the Centre has paid GST compensation for the entire fiscal year 2022 to states by early November, some chief ministers said that for increasing capital expenditure, it would really be helpful to get part of the tax devolution for the current financial year in advance. “I have directed the finance secretary who is also taking care of expenditure to do this immediately so that this being an exceptional year, states will not be short of money in their hands when all of us are pushing for infrastructure expenditure to be taken up by them. I have suggested to the finance secretary that on 22 November, instead of the normal monthly instalment of devolution amount, which is a total of ₹47,541 crore, a total of ₹95,082 crore be given to the states," Sitharaman said.
The share of states in central taxes—at the aggregate level of 41%—has been decided by the 15th Finance Commission. Typically, this is transferred in 14 instalments in a fiscal year. The adjustment between the budget estimate and the revised estimate of such transfers is made in March. In November, instead of devolving one instalment out of 14, two instalments will be transferred.
Sitharaman urged states to help the country become the fastest-growing economy in the coming years by facilitating investment attractiveness and implementing ease-of-doing-business measures, and undertaking power reforms to reduce discom losses.
She further emphasized that since land is one of the major bottlenecks in many cases, states should smoothen land acquisition procedures and create land banks that can be tapped at the time of investment, a finance ministry statement said.
The finance minister also urged the states to strengthen their urban local bodies as they are now receiving larger allocation of funds and are increasingly being encouraged to pursue resource mobilization.