Centre Allocates ₹1.73 Trillion to States to Enhance Capital Expenditure

The Indian government has disbursed ₹1.73 trillion in tax devolution to states, almost doubling the ₹89,086 crore allocated in December. This initiative is intended to enhance states' capital spending, support welfare projects, and drive economic growth.

On January 10, 2025, the Indian government released ₹1.73 trillion to state governments, a significant rise from the ₹89,086 crore provided in December 2024. This increased allocation is aimed at accelerating capital spending and supporting development and welfare initiatives across the states.

Fund Distribution Among States: The funds have been distributed as follows:

Uttar Pradesh: ₹31,039.84 crore
Bihar: ₹17,403.36 crore
West Bengal: ₹13,017.06 crore
Madhya Pradesh: ₹13,582.86 crore
Maharashtra: ₹10,930.31 crore
Rajasthan: ₹10,426.78 crore
Odisha: ₹7,834.80 crore
Tamil Nadu: ₹7,057.89 crore
Karnataka: ₹6,310.40 crore
Gujarat: ₹6,017.99 crore
Chhattisgarh: ₹5,895.13 crore
Jharkhand: ₹5,722.10 crore
Assam: ₹5,412.38 crore
Telangana: ₹3,637.09 crore
Punjab: ₹3,126.65 crore
Kerala: ₹3,330.83 crore
Haryana: ₹1,891.22 crore
Uttarakhand: ₹1,934.47 crore
Himachal Pradesh: ₹1,436.16 crore
Tripura: ₹1,225.04 crore
Meghalaya: ₹1,327.13 crore
Manipur: ₹1,238.90 crore
Nagaland: ₹984.54 crore
Goa: ₹667.91 crore
Sikkim: ₹671.35 crore
Mizoram: ₹865.15 crore
Arunachal Pradesh: ₹3,040.14 crore

Budget and Devolution Process: The Union Budget for 2024-25 has allocated ₹12.2 trillion for states, marking a 10.4% increase compared to the revised estimates of the previous year. Tax devolution typically happens in 14 installments each year, with 11 disbursed monthly and the remaining three in March.

Finance Commission Recommendations: The 15th Finance Commission has recommended that 41% of central taxes be devolved to states for the 2021-26 period, maintaining the same share as in 2020-21. This is a slight decrease from the 42% share for the 2015-20 period, adjusted for the creation of Jammu and Kashmir and Ladakh as Union Territories.

Impact on State Expenditures: This enhanced devolution is designed to enable states to increase their capital expenditures, fostering economic growth and funding various development and welfare projects. The Finance Ministry is also expected to ease the release of interest-free capital expenditure loans to further support capex utilization for FY25.

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