Grants to help states have decreased, finds report

The restructuring of fund flow was done after the 14th Finance Commission enhanced states’ share of divisible pool of taxes from 32 per cent to 42 per cent.

Published: 01st November 2017 08:21 AM  |   Last Updated: 01st November 2017 08:33 AM   |  A+A-

Notes, Money, Currency

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Express News Service

 

NEW DELHI: A report prepared by the government has highlighted the increasing disparity in financial allocation to states for centrally-sponsored schemes. The report authored by M Govinda Rao classified states into three categories — six ‘core of the core’, 22 ‘core’, and 45 ‘optional’, with funding requirements of states stipulated at 30 per cent, 40 per cent and 50 per cent, respectively. Unlike in the past, it’s only the six ‘core’ schemes, including MGNREGA, NRHM and PMGSY, for which 70 per cent funding is done by the Centre.

The restructuring of fund flow was done after the 14th Finance Commission enhanced states’ share of divisible pool of taxes from 32 per cent to 42 per cent. The share of general purpose transfers, which is unconditional and on the basis of the recommendation of the Finance Commission, has also risen sharply from 55.5 per cent in 2014-15 to nearly 72 per cent in 2017-18.

Specific purpose grants, which are meant to help the states improve their key social indicators, have correspondingly gone down. The Centre’s argument was that since the states’ share in revenues had been enhanced, they should match it with higher contribution for social sector schemes. “The uniform matching ratio across states makes it difficult for the low income states to utilise the grants allocated to them fully,” the report notes.

Citing an example, it says: “In the event, Kerala, one of the most advanced states in elementary education and healthcare, also avails the grant by making the same matching contribution, while Bihar, which is educationally the most backward state, does not get adequate grants as it finds hard to contribute the matching ratio.”

That the new distribution formula is proving against the interests of the poorer states is made evident by the report which says while “considering wide variations in per capita GSDP (Gross State Domestic Product) among the states, with the richest state having more than five times the per capita GSDP of the poorest, completely offsetting the fiscal disabilities to enable the low income states to equalise their per capita expenditures may simply not be politically feasible in India”.

Education and healthcare are sectors where poorer states are particularly suffering because of lack of financial resources, the report says. A detailed analysis of the National Rural Health Mission (NRHM) and MGNREGA shows they suffer from the same malice, it adds.

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