Centre Releases ₹1.73 Trillion to States to Boost Capital Spending
On January 10, 2025, the Indian government disbursed ₹1.73 trillion to state governments, a substantial increase from the ₹89,086 crore released in December 2024. This enhanced allocation aims to expedite capital expenditure and support development and welfare initiatives across states.
The distribution of funds among states is as follows:
The Union Budget for the fiscal year 2024-25 has earmarked ₹12.2 trillion for states, reflecting a 10.4% increase over the revised estimates of the previous fiscal year. Typically, tax devolution to states occurs in 14 instalments annually—11 distributed monthly and the remaining three in March.
The 15th Finance Commission has recommended that 41% of central taxes be allocated to states for the period 2021-26, maintaining the same percentage as in 2020-21. This is a slight reduction from the 42% share proposed for 2015-20, adjusted to account for the creation of the Union Territories of Jammu and Kashmir and Ladakh.
This increased devolution is intended to empower states to enhance their capital expenditures, thereby stimulating economic growth and funding various development and welfare projects. The Finance Ministry is also expected to relax norms for the release of interest-free capital expenditure loans to states to further boost capex utilization for FY25.
| Key Points | Details |
|---|---|
| Why in News | The Centre released ₹1.73 trillion as tax devolution to states in January 2025, up from ₹89,086 crore in December 2024. Aimed to boost states’ capital spending and welfare projects. |
| Tax Devolution Percentage | 41% of central taxes allocated to states as per the 15th Finance Commission (2021-26). |
| Largest Beneficiary States | Uttar Pradesh (₹31,039.84 crore), Bihar (₹17,403.36 crore), Madhya Pradesh (₹13,582.86 crore), Maharashtra (₹10,930.31 crore). |
| 15th Finance Commission Mandate | Covers the period 2021-26; reduced tax share from 42% (2015-20) to 41% due to J&K and Ladakh becoming Union Territories. |
| Purpose of Funds | To enhance capital expenditure, support welfare projects, and stimulate economic growth. |
| Union Budget 2024-25 Allocation | ₹12.2 trillion earmarked for state transfers, reflecting a 10.4% increase over the previous fiscal year. |
| Tax Devolution Mechanism | Distributed in 14 instalments annually—11 monthly and 3 in March. |
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