Higher tax mop-up has 12 states in Rs 4,000 cr fiscal surplus in Apr-Jun quarter, says Icra

Mumbai: Driven by higher tax revenues and a sharp fall in expenditure, combined revenue receipts of 12 states grew at a robust 17.6 percent in the three months to June against 11.1 percent a year ago, leaving them with a fiscal surplus of Rs 4,080 crore.

These states have, in fact, budgeted a fiscal deficit of whopping Rs 1,14,160 crore for the current fiscal year, says a report by the domestic rating agency Icra.

Also, with revenue growth outpacing revneue spending, these states showed an unaudited revenue surplus of Rs 43,430 crore in Q1 as against a combined revenue deficit of Rs 11,890 crore as budgeted for the year.

"Given the steep contraction in capital spending, these 12 states showed an aggregate fiscal surplus of Rs 4,080 crore, which is in sharp contrast to a combined fiscal deficit of Rs 1,14,160 crore budgeted for the year," says Icra chief economist Aditi Nayar in a note.

While tax revenues rose 17.1 percent, almost double of 9.6 percent in the June quarter, non-tax revenues rose 19.5 percent against 17.3 percent a year ago, taking the overall revenue receipts growth to a high of 17.6 percent.

Tax revenue and non-tax revenue account for around 78 percent and 22 percent, respectively of incremental revenue during the reporting three months and their tax revenue alone expanded by a healthy 16.5 percent.



The agency said the numbers are only of 12 states-- Chhattisgarh, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Odisha, Punjab, Rajasthan, Telangana, Uttar Pradesh, Uttarakhand and Maharashtra -- because unaudited numbers are available only from them, she says.

On the contrary, their combined revenue expenditure declined to 10.3 percent from 15.9 percent, but revenue spending stood at 17.3 percent of the budget 2018 estimates, nearly in line with the trend last year.

Again, their capital outlay contracted by a whopping 19.3 percent as against a whopping 51.9 percent increase a year ago, which was partly due to the late presentation of the 2018 budget following the assembly polls in Punjab and UP.

Excluding UP and Punjab, capex of other 10 states plunged to 6.2 percent from 45.9 percent and so the report warns that the takeover of debt of the state discoms by states under the Uday scheme will weigh on capex this year.

Spending trends shown by these states are in sharp contrast to high growth rates of 25.8 percent and 40.3 percent, respectively, in Centre's revenue and capex.

Combined revenue receipts and revenue expenditure of these states comprised a sizable 57.4 percent and 57.9 percent, respectively of the total revenue receipts and revenue expenditure of all the 29 states in the budget estimates, suggesting that this subset may be fairly representative of the underlying fiscal trends.

States' revenue receipts are taxes--sales tax/VAT (the period of data is pre-GST), excise duty, stamp duty and registrations fees, and states' share in the Central taxes, and non-tax revenues include states' own non-tax revenues and grants from the Centre.

In Q1, tax revenues stood of Rs 2,33,800 crore and accounted for nearly 80 percent of their total revenue which stood at Rs 2,93,930 crore, and the balance 20 percent came in from non-tax sources and stood at Rs 60,130 crore.

Provisional data for these states reveals weakness in capital expenditure despite healthy revenue growth, which improved to a robust 17.6 percent. The pace of expansion of their total tax revenues rose sharply to 17.1 percent to Rs 2,33,800 crore from 9.6 percent.

As per Controller General of Accounts' data, total Central tax devolution to all 29 states rose to Rs 1,44,550 crore from Rs 1,22,210 crore, and the pace of growth of the same more than doubled to 18.3 percent from 8.9 percent.

The aggregate inter se share of states in the sub-set, in the Central tax devolution is 55.8 percent for the 14th Finance Commission's award period. Assuming that these states have received 55.8 percent of the total tax devolution to the states in both these time periods, and Nayar estimates that the Central tax devolution to this sub-set rose to Rs 80,660 crore up from Rs 68,190 crore a year ago.

Also, total tax revenues, excluding Central tax devolution rose to Rs 1,53,150 crore from Rs 1,315,00 crore and based on this, thse states' own tax revenue growth rose by 16.5 percent from 10.1 percent.

Updated Date: Sep 05, 2017 19:14 PM

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