Revenue resilience or decline? A four-decade analysis of Haryana’s finances

Revenue receipts of state represent its capability in generating income and its potential to spend on various capital and social infrastructure. The paper’s primary objective is to illuminate the trends and patterns in revenue receipts and assess the tax-to-gross state domestic product (GSDP) ratio in Haryana. The study is grounded in secondary data spanning from 1980-81 to 2020-21. The findings of the study indicate a gradual decline in the tax-to-GSDP ratio over time, with stagnation observed in the last decade. Despite being one of India’s most developed state economies, Haryana’s stagnant or declining tax-to-GSDP ratio poses significant challenges to its financial well-being. Alarmingly, Haryana’s tax-to-GSDP ratio, which stood at 6.95 per cent in 2020-21, is even lower than the national average of 11.7 per cent for the 2021-22. Moreover, the state’s own tax percentage share in total tax revenues exhibits a consistent decreasing trend, a worrying sign for any developing economy. Consequently, it is imperative for the government to shift its focus towards increasing the tax-to-GSDP ratio. The persistently low ratio has compelled heavy borrowing and persistent fiscal deficits. As a result, the government’s liabilities continue to rise, eroding its capacity to allocate more funds to essential welfare schemes over time. This issue necessitates immediate attention to ensure the financial health and sustainability of the state’s economy.

⓿ The revenue receipt to GSDP ratio has exhibited a consistent decline over the years, remaining almost stagnant in the last decade.

⓿ Haryana’s tax-GSDP ratio is notably lower than the national average in India.

⓿ There is no considerable relative improvement in states’ own tax revenue over time in terms of tax to GSDP ratio.

⓿ It is imperative for the government to place a strong emphasis on augmenting its tax revenue while exploring novel avenues for generating additional revenue.