Top 18 Indian states to see an uptick of 7-9 pc in revenue growth this fiscal: Report

New Delhi, July 29 (IANS) Revenue growth of India’s 18 largest states, which account for over 90 per cent of the gross state domestic product, is likely to witness a uptick at 7-9 per cent this fiscal to Rs 40 lakh crore, up against 6.6 per cent in last fiscal, a report said on Tuesday.

"The uptick will be supported by the expectation of steady GST collections and devolutions from the Centre, while grants are expected to witness recovery during fiscal 2026, after a fall last fiscal," Crisil Ratings said in its report.

States have two revenue streams - the states’ revenue (SOR) and transfers from the Centre. SOR primarily includes the state’s tax revenue (SOTR), which primarily consists of goods and services tax (GST) as well as liquor and petroleum tax.

SOTR is expected to grow 8 per cent this fiscal, driven by GST and liquor tax, with a modest growth from petroleum tax, the report stated.

"GST collections remain the driver for states’ taxes, with on-year growth projected at 9-10 per cent for this fiscal, marginally lower than the last. The GST collections should sustain considering an expected nominal GDP growth of around 9 per cent," said Anuj Sethi, Senior Director, Crisil Ratings.

While better tax compliance and continuing shift in economic activity from the unorganised to the organised sectors are expected to support GST revenue, subdued domestic consumption and inflation can be dampeners and pose a downside risk to that expectation, he added.

Revenue from liquor sales is likely to grow a stable 9-10 per cent on-year, following a similar growth of 9.6 per cent last fiscal.

This will be driven by two factors - rising consumption leading to a volume growth of 5-6 per cent and states levying higher excise duty, the report noted.

Revenue from sales tax on petroleum products will also grow around 2 per cent year-over-year this fiscal.

On the other hand, grants from the Centre are expected to recover and grow by 3-4 per cent due to higher outlay towards centrally sponsored schemes (CSS) and Finance Commission grants to urban and rural local bodies, as also evidenced from the budget estimates of central and state governments for fiscal 2026, the report highlighted.

--IANS

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