ICRA pegs GST compensation for states at Rs 2.65 L cr

Projecting the FY22 state GST (SGST) collections of all states at Rs 6.1 lakh crore, rating agency ICRA expects a large GST compensation requirement of Rs 2.65 lakh crore for the current year.

It said actual fiscal outcomes will vary considerably across the states, depending on the impact of infections-restrictions-vaccinations on regional economic activity.

Chief Economist Aditi Nayar said that after a sharp fiscal deterioration in FY21, the Budget estimates for FY22 of 24 state governments had indicated a decline in their aggregate revenue deficit to Rs 1.2 lakh crore -- similar to the pre-Covid-19 level of Rs 1.3 lakh crore in FY20.

This benefitted from the considerable 24.7% increase forecast in their revenue receipts in FY22 compared to the 12.4% growth in their revenue expenditure.

The anticipated shrinking of revenue deficit allowed states to plan for a substantial 34.1% expansion in capital expenditure and net lending, while still attempting a modest correction in fiscal deficit to Rs 7.6 lakh crore in FY22 from Rs 8.7 lakh crore in revised estimates for FY21.

ICRA expects the second wave of Covid-19 infections to curtail consumption of discretionary items and contact-intensive services, thereby weighing upon states own tax revenue in FY22. "The data for generation of GST e-way bills confirms that staggered onset of localised lockdowns had an adverse impact on economic activity since April," said Nayar.