States' Revenue to Soar Past ₹44 Lakh Crore

Revenue for 18 major Indian states is projected to exceed ₹44 lakh crore by fiscal 2027, according to Crisil Ratings. This anticipated surge represents an annual growth of 9%-11%, an acceleration from the estimated 8% growth observed last fiscal. The primary drivers for this improvement are expected to be enhanced Goods and Services Tax (GST) collections and greater tax transfers from the Centre.

GST is anticipated to be the main catalyst for revenue expansion, with collections forecasted to rise by 12%-13% in fiscal 2027. This growth will be supported by both domestic consumption and import taxes. Tax devolution from the Centre is also expected to contribute significantly, with an 11%-12% increase projected, benefiting from a recovery in personal income tax collections and stronger nominal economic growth.

While GST leads the revenue growth, taxes on liquor and petroleum products are expected to see slower growth of 7%-8% and 4%-5% respectively. Other state-collected taxes will likely grow at 6%-7%. Grants and non-tax revenue are also anticipated to add to the overall receipts, with projected increases of 6%-7% and 9%-10% respectively. However, revenue growth will not be uniform across all states, depending on their individual revenue mixes and collection efficiencies.