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Non-tax revenue refers to the income that the government earns from sources other than taxes. One significant component of non-tax revenue is interest receipts. These are payments received by the government as interest on loans and advances it has provided to various entities, including state governments, public sector enterprises, and foreign governments.
From a pitiful 589 crore rupees in 1970–71 to 24,820 crore rupees in 2023–24 (CAGR of 12.7%), India’s non-tax revenue from interest receipts has grown significantly. The growth was relatively slow in the first two decades, with receipts increasing from 589 crore in 1970-71 to 1,795 crore in 1980-81. There was a sharp acceleration in growth during this period. Receipts jumped from 8,730 crore in 1990-91 to 32,811 crore in 2000-01, almost quadrupling in a decade. After peaking in the early 2000s, there was a period of fluctuation and relative stabilization. In the last two decades, the receipts have oscillated between 15,000 to 25,000 crore. The highest interest receipts were recorded in 2003-04 at 38,538 crore. This was followed by a significant decline due to changes in economic policies, interest rates, or the government’s borrowing and lending patterns. There has been a moderate upward trend in the last few years (2020-2024), as evidenced by receipts increasing from 17,113 crore in 2020-21 to 24,820 crore in 2023-24. This could indicate a recovery or a new phase of growth.
The overall growth in interest receipts suggests an expansion of the government’s lending activities or an increase in its interest-earning investments over time. The fluctuations, especially the decline after the 2003-04 peak, reflect changes in India’s economic policies, possibly related to liberalization and changing roles of government in the economy. The recent uptick could be associated with new government initiatives or changes in monetary policy. The rapid growth in the 1990s and early 2000s coincides with India’s economic liberalization policies. Fluctuations could be partly attributed to changes in interest rates set by the Reserve Bank of India. Changes in government policies regarding loans to states, PSUs, or other entities could significantly impact these receipts. Major global events like the 2008 financial crisis also influenced this trend, particularly the fluctuations seen in the late 2000s and early 2010s.
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