The Centre on Friday released an additional tax devolution instalment of Rs 72,961 crore to states, taking the total to Rs 1.45 trillion in December. The move is aimed at supporting consumption and investment spending ahead of year-end festivities.

The December release was the second such additional monthly devolution after a similar amount was released in June to increase liquidity with the states to frontload capital expenditure and other developmental expenditure.

With the two extra instalments in December, the Centre’s tax devolution has reached Rs 7.47 trillion or 73% of its FY24 target of Rs10.21 trillion, compared with 63% of the relevant target in the year-ago period.

“In view of the forthcoming festivities and the New Year, the Union government has authorised the release of an additional instalment of tax devolution amounting to `72,961.21 crore to strengthen the hands of state governments for financing various social welfare measures and infrastructure development schemes,” the finance ministry said in a statement.

This instalment is also in addition to the tax devolution instalment due to states on January 10, 2024, and the instalment of `72,961 crore already released on December 11 this year.

Capital expenditure was frontloaded by the states, resulting in a year-on-year growth of 47.3% in H1FY24, with Q1 and Q2 at 72.4% and 33.6%, respectively.

States’ thrust on capital spending was also aided by the Union government’s ‘Scheme for Special Assistance to States for Capital Investment’. As of end-October 2023, the Centre has approved outgoes under this head amounting to `96,206 crore (accounting for 74% of the `1.3 trillion budgeted for 2023-24), out of which `58,494 crore has already been disbursed to the states, improving the quality of their expenditure.