On October 10th, 2024, the Indian government announced the release of ₹1,78,173 crore as part of tax devolution, which includes states’ share of the divisible pool of Central Taxes and duties. This instalment includes ₹89,086.50 crore released in advance to help state governments finance development projects and welfare activities, especially in light of the upcoming festive season.
This significant move is part of the government’s strategy to accelerate capital spending and ensure states have enough resources to meet their financial obligations.
Distribution of Tax Revenue Across States
Among the states, Uttar Pradesh received the largest allocation, amounting to ₹31,962 crore, accounting for 17.9% of the total funds disbursed. In contrast, Goa received the smallest share of ₹688 crore. Below is the list of state-wise distribution of tax revenue:
- Uttar Pradesh: ₹31,962 crore
- Goa: ₹688 crore
- Andhra Pradesh: ₹7,211 crore
- Karnataka: ₹6,498 crore
- Kerala: ₹3,430 crore
- Tamil Nadu: ₹7,268 crore
- Telangana: ₹3,745 crore
- Bihar: ₹17,921 crore
- Madhya Pradesh: ₹13,987 crore
- West Bengal: ₹13,404 crore
- Maharashtra: ₹11,255 crore
- Rajasthan: ₹10,737 crore
Notably, Uttar Pradesh alone received more funds than all five South Indian states combined.
Concerns from South Indian States
Several South Indian states, including Karnataka, Kerala, and Tamil Nadu, have voiced concerns about the allocation of tax devolution. They argue that the current distribution is skewed in favor of Northern states like Uttar Pradesh. This discrepancy has led to renewed calls for a more equitable approach to fiscal federalism, with southern states contributing significantly to the nation’s revenue pool.
A Call for Recalibrating Fiscal Federalism
In September 2024, Kerala hosted a high-profile conclave addressing the need for reforms in India’s fiscal federalism. Participants emphasized the growing economic disparity between states and advocated for a redistribution model that rewards state performance and upholds fiscal autonomy. As the 16th Finance Commission prepares its recommendations, many southern states are hoping for more balanced fiscal policies.
The conclave highlighted that without a more equitable distribution of tax revenues, the economic development of both the states and the nation could be adversely affected.
