States expect higher tax devolution from Centre

Mumbai: Tax devolution by the central government is likely to exceed the budget estimate by at least Rs 1.1 lakh crore in FY23, leading to compression in the gross borrowing by states to Rs 8.4 lakh crore, a report said on Monday.

However, the borrowing cost for the states has went up from 7.17 per cent in Q4 FY22 to 7.34 per cent on May 2 this fiscal, according to an analysis by Icra Ratings.

The central tax devolution is likely to rise to Rs 9.3 lakh crore in FY23 from Rs 8.8 lakh crore in FY22 and from Rs 8.2 lakh crore estimated in the FY23 budget.

The FY22 devolution was higher than the revised estimate of Rs 7.4 lakh crore and 2.8 per cent lower at Rs 8.1 lakh crore, Aditi Nayar, the chief economist at the

agency, said.

During the first five weeks of the first quarter of this fiscal, states have borrowed 82 per cent less than what was indicated in the borrowing calendar, at just Rs 12,400 crore against Rs 67,200 crore indicated initially by 19 states, following higher-than-expected devolution in fourth quarter FY22 at Rs 95,100 crore on March 24, and 31,

Nayar said.

The agency had estimated net and gross SDL (State Development Loan) issuance in FY23 at Rs 6.6 lakh crore and Rs 8.9 lakh crore, respectively last month.