New Delhi: In a bid to boost capital spending and support welfare initiatives, the Centre released Rs 1,73,000 crore to states as part of its tax revenue devolution. The funds nearly double the Rs 89,086 crore disbursed in December 2024. According to the government, the increased allocation aims to accelerate state-level capital investments and development activities.
Strategic Timing Amid Slowing Growth
The tax devolution has come before the schedule, coinciding with the government’s first advanced estimates predicting gross domestic product (GDP) growth of 6.4 per cent for the financial year (FY) 25, the lowest in four years. This is a sharp decline from the 8.2 per cent growth in FY24. Experts attribute the slowdown to reduced fiscal stimulus and a sharp dip in the second quarter of FY25, where GDP growth dropped to a two-year low of 5.4 per cent. The funds are expected to mitigate these challenges by enabling states to stimulate economic activity.=
State-Wise Allocation
Among the states, BJP-ruled Uttar Pradesh received the largest share, with Rs 31,039.84 crore allocated. Bihar followed with Rs 17,403.36 crore, and Madhya Pradesh received Rs 13,582.86 crore. Other significant allocations included West Bengal (Rs 13,017.06 crore), Maharashtra (Rs 10,930.31 crore), Karnataka (Rs 6,310.40 crore), and Jharkhand (Rs 5,722.10 crore).
Focus on Development
The Centre’s decision reflects its commitment to bolstering state economies through enhanced fiscal support. By prioritizing timely fund distribution, the government aims to enable states to sustain development efforts and manage welfare expenditures, especially amidst economic slowdown.
The move highlights the significance of capital expenditure as a driver for growth and economic recovery at both state and national levels.
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