Fri Jan 31 11:52:02 UTC 2025: ## India’s Fiscal Discipline Improves, Driven by Increased Tax Devolution: CEA

**New Delhi, January 31, 2025** – India’s fiscal discipline has shown significant improvement, according to Chief Economic Advisor (CEA) V. Anantha Nageswaran. Presenting findings from the Economic Survey tabled on Friday, Nageswaran highlighted a progressive strengthening of the Union Government’s fiscal indicators and an improved tax revenue position for state governments.

The improvement is attributed to increased tax devolution from the central government to the states. The CEA noted that the quality of Union government expenditure has consistently improved since FY2021, with deficit indicators comfortably positioned, allowing for substantial developmental and capital expenditure.

While capital expenditure was initially subdued in the first quarter of FY2025 due to general elections, it rebounded in July following the increased tax devolution. This growth occurred despite a reduction in non-debt receipts. Defense, railways, and road transport accounted for approximately 75% of capital expenditure until November 2024, while power, food, and public distribution sectors saw significant year-on-year growth.

Despite a 10.7% year-on-year increase in gross tax revenues, the net tax revenue retained by the Union government (after devolution) saw minimal increase. This is directly linked to the increased transfers to the states, which aided their expenditure management.

Analysis of 27 states’ unaudited estimates (April-November 2024) revealed comparable growth in the Union’s gross tax revenue and states’ own tax revenue (OTR). While stamps, registration, state excise duties, and other taxes showed positive growth, land revenues declined. Telangana led with the highest OTR at 88%, followed by Karnataka and Haryana at 86%. States with higher ratios of own revenue receipts to total revenue receipts also tended to have lower revenue deficits. Maharashtra, Tamil Nadu, and West Bengal had the highest shares from their own tax sources, while Odisha had the highest share of non-tax revenue. Over fifteen states saw OTR account for more than half their total tax receipts, with GST being the primary revenue source for 23 states; Meghalaya and Nagaland showed the greatest reliance on GST.

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