Empowering States: Centre’s Rs 81,735 Crore Initiative Nurtures Local Aspirations

In a bold fiscal move poised to turbocharge state development, the central government has greenlit an additional tax devolution of Rs 81,735 crore to state governments, with funds hitting state coffers on June 2, 2025. This unprecedented double instalment—arriving just days before the regular monthly transfer of the same amount scheduled for June 10—catapults June’s total devolution to a staggering Rs 1,63,470 crore.

 

Key Highlights:

 

Early Release for Maximum Impact: The advance disbursement aims to empower states to accelerate capital expenditure, fast-track welfare programs, and unlock resources for high-priority infrastructure projects.

 

Cooperative Federalism in Action: The Finance Ministry underscored that this move exemplifies the government’s commitment to cooperative federalism and aligns with the ambitious vision of achieving ‘Viksit Bharat’ (Developed India) by 2047.

 

Economic Multiplier: Economists anticipate a strong multiplier effect, as state-level capital spending is known to drive economic activity, especially in sectors like construction and public services.

 

Fiscal Snapshot: Under current arrangements, 41% of the Centre’s tax revenues are devolved to states in periodic instalments. For FY26, total tax transfers to states are projected at Rs 14.22 lakh crore, reflecting a robust increase over previous years.

 

This strategic financial boost is expected to provide states with the much-needed liquidity to kickstart stalled projects, enhance welfare delivery, and stimulate local economies—signalling a new era of empowered state governance and rapid grassroots development.

 

Sources: Moneycontrol, Economic Times, Business Standard