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State finances: 40% rise in states' own revenue expected

Mamata Singh in New Delhi

State governments expect a 40 per cent jump in their revenue during the Tenth Five-Year Plan. Four states -- Maharashtra, Uttar Pradesh, Andhra Pradesh and Tamil Nadu -- are expected to account for 40 per cent of the states' total revenue during 2002-07.

The total revenue of state governments during the Tenth Five-Year Plan is projected at Rs 13459.50 billion. Against this, the revenue realisation during the Ninth Plan, at 2000-01 prices, was Rs 9,583.60 billion.

During the Tenth Plan, states' own tax revenue is projected to rise almost 47 per cent, while their share in central taxes is expected to rise 37 per cent against the Ninth Plan. States' share in central taxes as a percentage of the gross domestic product constantly fell during the nineties and the trend got accentuated during the Ninth Plan.

The non-tax revenue is expected to rise 30 per cent during the Tenth Plan, while non-Plan grants from the Centre are expected to fall a little over 2 per cent.

Increasing tax buoyancy being a major area of focus with the introduction of the value-added tax and with the expansion of the tax net to rope in more services, states' own tax revenue as a percentage of their total revenue is projected to go up from 44 per cent during the Ninth Plan (at 2000-01 prices) to 70 per cent during the Tenth Plan.

States' own tax revenue, at 2000-01 prices, is projected to grow more than 50 per cent in states like Kerala, Uttar Pradesh, Rajasthan, West Bengal, Delhi, Orissa and Karnataka.

While West Bengal's own tax revenue is projected to increase 50 per cent, Maharashtra's own tax revenue is expected to go up 40 per cent during the Tenth Plan period against the Ninth Plan projections.

Special category states have projected a 96 per cent increase in their own tax revenue between the two Plan periods.

Share of central tax revenue in states' total revenue is also expected to go up sharply from 19 per cent in the Ninth Plan to 30 per cent in the Tenth Plan.

Progressive states get a smaller share in central taxes because the devolution formula devised by the Finance Commission inversely relates almost two-thirds of the amount to per capita income.

Uttar Pradesh, Bihar and West Bengal are projected to capture almost 43 per cent of the total devolution of central taxes to non-special category states.

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