New Delhi: The Union government will release Rs 95,082 crore as tax devolution to the states this month after including one advance instalment to help them push their capital expenditure, Finance Minister Nirmala Sitharaman announced on Monday.
The announcement came after Nirmala Sitharaman chaired a meeting with chief ministers and state finance ministers to discuss ways to create a reform-focused business climate and further facilitate investments to help boost growth.
Speaking about the meeting, she informed that chief ministers of 15 states, Deputy chief ministers of three states, Jammu and Kashmir Lieutenant Governor Manoj Sinha, and finance ministers of other states participated in the discussions today.
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“Some of the chief ministers requested for increasing the states’ capital expenditure. They said it would be helpful for them to get a part of the tax devolution. I have directed the finance secretary to do this immediately”: Finance Minister Nirmala Sitharaman said, as reported by news agency ANI.
“I have suggested the Finance Secretary that on November 22 instead of normal Rs 47,541 crore, the states be given one more instalment. So Rs 95,082 crore will be given to states on November 22,” she informed, as quoted by news agency PTI.
With this, states will have more money in their hands so that they can consider spending it for infrastructure creation, she added.
Currently, 41 per cent of the tax collected is devolved in 14 instalments and states have predictability of their cash flows, Finance Secretary TV Somanathan stated.
This is an advance release, and any adjustments will be made in March, he added.
Nirmala Sitharaman said the context of the meeting was that “after the second wave we are seeing robust growth. However, it is also a time where we are looking at ways to sustain growth and take it as close to a double-digit growth and for which, both the centre and the states will have to work together”.
“This meeting was essentially to seek ideas from states because in most of the issues related to investment development, and also for manufacturing and business activities, come in states domain,” she added.
I have asked Finance Secretary, that on 22nd November, instead of the normal monthly instalment of tax devolution amount of ₹47,541 crores, another ₹47,541 crores to be released. A total of ₹95,082 crores will be given to States – Finance Minister @nsitharaman pic.twitter.com/4TlLw2pKCz
— PIB India (@PIB_India) November 15, 2021
FM Nirmala Sitharaman’s Meeting
According to an official statement by the Ministry of Finance, the meeting was attended by Chief Ministers of Assam, Chhattisgarh, Goa, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Tripura, and Uttar Pradesh.
“Lt Governors of Jammu and Kashmir; Deputy Chief Ministers of Arunachal Pradesh, Bihar, and Delhi. State Ministers of Andhra Pradesh, Gujarat, Kerala, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttarakhand, and West Bengal; State Government Officials of Ladakh, Maharashtra, Jharkhand, Andaman and Nicobar, Chandigarh, Dadra and Nagar Haveli and Daman and Diu, Lakshadweep along with Secretaries of GoI Line Ministries, Chief Secretaries and Finance Secretaries Secretary (Economic Affairs), Joint Secretaries (Economic Affairs) and other officials of Centre and State,” the statement mentioned.
In her opening remarks, Finance Minister Nirmala Sitharaman emphasised that the economy has been growing significantly post the second wave of pandemic and indicators such as imports, exports, PMI manufacturing, digital payments, etc. have already reached pre-pandemic levels.
She highlighted that with favourable international perception of India’s growth and in light of the structural, sectoral and financial, reforms undertaken by Government of India, global and domestic investors are upbeat about the investment attractiveness of the country. States should leverage this opportunity to scale up investments and growth, she said.
The Finance Minister also said that the government has taken concrete steps to increase capital spending and drive infrastructure and investment-led growth.
“Benefits of higher investment in Infrastructure manifest in form of increased employment opportunities, access to market and materials, improved quality of life and empowerment of vulnerable sections. Union Budget FY 2021-22 has allocated Rs 5.54 lakh crore capital outlay, an increase of 34.5% over last year. Additionally, around Rs 2 lakh crore allocation is for states and autonomous bodies for their capital expenditure. Over and above this, a new incentive scheme was launched by GoI for states that could achieve at least 15 % of the target set for FY21-22 by the end of 1st quarter, 45% by end of 2nd quarter, 70 % by the end of 3rd quarter. States that achieve their targets become eligible for incremental borrowing. After the end of 1st quarter, 11 states got permission to mobilise an additional total amount of Rs 15,271 crore,” the finance ministry’s statement read.
Union Finance Minister Smt. @nsitharaman interacts with Chief Ministers/ State Finance Ministers and Lt Governors of UTs to step up investment, infrastructure and growth
Read more ➡️ https://t.co/FjqQk8BB5F https://t.co/R6BjGhh8jC pic.twitter.com/EVWlnZTQht
— Ministry of Finance (@FinMinIndia) November 15, 2021
Nirmala Sitharaman urged states to help India become the fastest growing economy in coming years, through facilitating investment attractiveness and expediting ease of doing business measures and undertaking power reforms with regards to reduction in ATandC and ACS-RRR. She emphasised that states must contrive to smoothen land acquisition procedures and create land banks to be tapped at the time of investment.
“The Finance Minister said that she is looking forward to listening from states and understand their ideas and plans in the direction of investment enhancement. In the open interaction, States thanked GoI for organizing this consultative interaction. Each of the states enumerated the list of reforms and pro-active policies they are pursuing to establish good governance and to facilitate investments,” the ministry wrote.
To facilitate investment promotion, states shared key ideas and requests on issues such as Affidavit-based clearance system, Transparent Mechanism for Investment Facilitation, clear-cut policy and SOPs on environment and forest clearances by centre, Fast-track clearance and approvals for externally-aided projects by GoI, enhancing road connectivity in North-Eastern states, Development of agri-specific infrastructure, Need for policy for offshore wind energy and Continuation of Centre’s Scheme of loan for capital expenditure beyond the current financial year.
Post-COVID Economic Recovery
The important meeting comes in the backdrop of economic recovery after the two waves of COVID-19 pandemic, as the Union government pushes to increase capital expenditure. The Centre believes that there is scope to capitalise on the positive sentiment of the private sector, with increasing demand, amid lower non-performing assets and banks willing to lend more, PTI reported.
After a slowdown in economic growth due to the COVID-19 pandemic, the first quarter of the current fiscal has seen a pickup in economic activity. Indian economy contracted 7.3 per cent in the last financial year after a 4 per cent growth in 2019-20.
In the April-June quarter of the current fiscal, the economy grew 20.1 per cent. Besides, the first four months of FY 2021-22 have witnessed Foreign Direct Investment (FDI) of USD 64 billion.
The IMF and World Bank peg India’s GDP growth at about 9.5 per cent and 8.3 per cent, respectively, projecting the nation as one of the fastest-growing economies.
(With Inputs From Agencies)