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State Government Revenue Raising

Given the reluctance of Union Government to transfer any additional amount, States
Governments are on their own to deal with this pandemic. Are there any States, which in
their 2021-22 budget, have introduced any innovative ideas to raise additional

This is not an answer to your query but to a related issue of whether or not raising taxes is the correct way to revive the economy given that it is a contractionary fiscal policy. I found Kerala Budget 2021-22 to be quite interesting in this aspect, as it has taken the position that this is not the time to increase taxes given that various sectors of the economy need to be revitalised. I remember, from glancing at the budget speech 2021-22, that Kerala has perhaps reduced tax rates or increased tax incentives!

Hi Madhav,

I can’t be sure for all states, but Kerala did have a source of revenue in budget 2020-21 which can be called innovative.

Essentially, this is done by Kerala Infrastructure Investment Fund, which will sell bonds to raise resources, where payment of bond/interest is securitized against an existing regular government source of revenue, like vehicle tax, etc.

As mentioned in another reply by Malini, raising taxes, especially indirect taxes, in economic slowdown might prove contractionary for the whole economy. And the sources of non-tax revenue have also been affected adversely by the pandemic. So, the point is that economic slowdown has made it tougher for states to raise any additional revenue.

I also want to mention something in reference to the first part of your question. In fact, if there is one tax source available with the government, it would be some direct tax at the very high level of income earners, both individuals and businesses, whose income have increased in the time of pandemic. But the power for that is with Centre, and not States. Even, on non-tax revenue front, Centre has more avenues than states. Hence, it should be Centre primarily responsible for raising additional resources in the time of economic crisis.