New Delhi: Ahead of the budget for 2025-26, the Centre on Friday ‘doled out’ a New Year gift to the states, releasing tax devolution of over Rs 1.73 lakh crore as against the devolution of Rs 89,086 crore in December 2024. The BJP-ruled states like Uttar Pradesh, Uttarakhand, Bihar, Madhya Pradesh, Maharashtra and Rajasthan received the highest amount among other states. The move of the government aims to spur capital spending among states.
The tax devolution also comes ahead of schedule after the central government’s first advance estimates said the gross domestic product or GDP is likely to grow at a four-year low of 6.4 percent in FY25, down from 8.2 percent in the previous financial year. Currently, 41 per cent of tax collected by the Centre is devolved in instalments among states during a fiscal year. The government, however, said that the money released would aid finance states’ in their developmental and welfare-related schemes. “A higher amount is being devolved this month to enable states to accelerate capital spending and finance their development and welfare-related expenditure,” the finance ministry said in a statement.
In terms of state-wise allocation, Uttar Pradesh, Uttarakhand and Bihar received the biggest share of funds. The BJP-ruled Uttar Pradesh received Rs 31,039.84 crore, Bihar Rs 17,403.36 crore, Madhya Pradesh Rs 13,582.86 crore, Maharashtra Rs 10,930.31 crore, Rajasthan 10,426.78 crore, while West Bengal was allocated Rs 13,017.06 crore, Karnataka Rs 6,310.40 crore and Jharkhand Rs 5,722.10 crore.
However, experts and economists have said that the economic growth of the country has been pulled down due to low fiscal stimulus and a sharp slowdown in the second quarter of FY25. In the September quarter, the GDP growth declined to two-year low of 5.4 percent.
