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Maharashtra tops in fiscal management amid high-income states: Study
Gujarat, Maharashtra and Haryana have recorded highest trend growth rate in terms of per capita income (PCI) during 2004-2013 amid high income states, revealed a just-concluded ASSOCHAM study.

"These three states amid high-income states have taken a massive leap forward from an annual PCI trend growth rate of 2.9 per cent, 2.8 per cent and 3.7 per cent during decade of 1993-2004 to 8.2 per cent, 7.2 per cent and 6.9 per cent," highlighted a study titled "States' Finances Convergence-2," conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

With annual PCI trend growth rate of six per cent and 4.8 per cent respectively, the states of Kerala and Punjab have also remained ahead in this aspect, noted the study prepared by The ASSOCHAM Economic Research Bureau (AERB).

In case of low income states, Bihar has remained on top with an annual PCI trend growth rate which had increased from 1.1 per cent during 1980-93 and 1.7 per cent during 1993-2004 to 7.2 per cent during 2004-13.

With a median value of 12.02 per cent of nominal gross domestic product (GDP) between FY 2006 and FY 2012, Gujarat has emerged as a leader amid high income states, while national median value of nominal GDP remained at 8.37 per cent, further highlighted the ASSOCHAM study.

Amid other high income states, Tamil Nadu has ranked second with a median value of 11.74 per cent followed by Maharashtra (10.78 per cent), Andhra Pradesh (10.10 per cent) and Haryana (9.2 per cent).

However, Maharashtra has ranked on top in terms of states' own tax revenue, share in Central taxes, states' own non-tax revenue and grants from the Centre, while Gujarat is ranked second in this behalf, noted the ASSOCHAM study.

Maharashtra is leading state in terms of fiscal management amid high income states as it has witnessed a significant surge in states own tax revenue which has increased from over Rs 87,600 crore in FY 2011-12 to over Rs 1 lakh crore in FY 2013-14 thereby clocking a growth rate of over 22 per cent.

Similarly, Maharashtra's share in central taxes has increased at a growth rate of about 36 per cent thereby increasing from over Rs 13,300 crore to over Rs 18,100 crore during the aforesaid period.

Besides, in terms of states own non-tax revenue has increased from over Rs 8,100 crore to over Rs 11,900 crore at about 47 per cent growth rate and grants from the Centre too have increased at about 53 per cent from over Rs 12,100 crore to over Rs 18,600 crore.

While, clocking a growth rate of over 36 per cent, Gujarat's own tax revenue grew from over Rs 44,250 crore to over Rs 60,200 crore during FY 2011-12 and FY 2013-14 while the state's share in Central taxes grew at over five per cent from over Rs 7,700 crore to about Rs 8,200 crore.

Besides, growing at about 21 per cent and about 55 per cent, Gujarat's own non-tax revenue and grants from the Centre have respectively grown from over Rs 5,200 crore to over Rs 6,300 crore and from over Rs 5,800 crore to over Rs 9,000 crore, added the ASSOCHAM study.

While amid low income states, Bihar has ranked on top with states own tax and non-tax revenues clocking a growth rate of over 66 per cent and about 284 per cent i.e. from over Rs 12,600 crore to over Rs 20,900 crore and from about Rs 890 crore to over Rs 3,400 crore respectively during 2011-12 and 2013-14.

"The wide introduction of value added tax (VAT) at state-level has significantly raised states' revenue from their own taxes despite many glitches at an early stage and they are now converging towards growth rate of high income states," said D.S. Rawat, national secretary general of ASSOCHAM while releasing the chamber's study.

The emerging picture of growth of states shows that while the high-income states in the country continue to grow, the low-income states are also catching up with them, noted the ASSOCHAM study. "This augurs well for immediate future as India's growth story pumped up by young middle class aspirations and political leadership that has to respond to it in democratic set up, enters a further phase of take off."

ASSOCHAM has been strongly supporting implementation of both the Direct Taxes Code (DTC) and a single Goods and Services Tax (GST) feels that these two measures would act as an adrenaline to entire economy by boosting the total pie available for sharing between the Centre and the states.

"The new government must create an environment where states are co-operating with it to implement a single national DTC and GST to replace the different and divergent state level taxes."

In its study, ASSOCHAM has also suggested that states must undertake to raise resources locally especially through non-tax route and rationalize revenue expenditures to generate more revenue surpluses.

Besides, in order to improve Centre-State relations, the governments must enter into a compact setting forth certain well defined objectives.

A consensus must also be developed between Centre and States on administrative expenditures as periodic revision of emoluments to Central employees creates similar pressures on state governments too for equitable payments to their staff.

The ASSOCHAM study has also recommended that each year the Centre should present to the Parliament every year a financial statement on finances of states analyzing their achievements, challenges and failures. "This could act as an incentive to states to perform better in meeting local resources and disincentive to wasteful sops being handed out."

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