THIRUVANANTHAPURAM: The state has asked the 15th Finance Commission that devolution of funds and functionaries to local self-governments be made a basic criterion of the FC for fund devolution to states.In its memorandum to the Finance Commission, the state government has suggested that 90 per cent of the total grants should be basic grants. Out of this, 60 per cent would be based on population and area and 30 pc on transfers to LSGs as a proportion of the state’s revenue expenditure. The remaining 10 per cent can be performance based grants.
Finance Commission’s share to the state disaster response fund should go up considering the densely populated long coastline. State is facing the fallout of the Ockhi cyclone and the Centre is giving grants up to 90 percent as recommended by the 14th Finance Commission.The states should have more flexibility to spend from this fund, at least 25 per cent as against the present 10 per cent. The past expenditure trends and a Hazard Vulnerability Index for ranking of states would be the ideal determinant for grants-in-aid for SDRF.
The state is committed to the fiscal deficit target of three per cent of GSDP. But any attempt to implement the FRBM Review Committee’s target of 1.7 per cent fiscal deficit-GDP ratio would be deleterious for the state finances and the economy. If capital expenditure is cut short it will affect the economy.
Abandoning population criterion based on 1971 census, which had an average weightage of 20 per cent, will put states which have effectively controlled population growth to greater disadvantage. It will also adversely affect their continued efforts to sustain past achievements in social sector.A suitable criterion in tax devolution should be introduced so that the share of states like Kerala do not fall below that of the 14th Finance Commission’s allocation.
Finanace Commission
The states should have more flexibility to spend from this fund, at least 25 per cent as against the present 10 per cent. The state is committed to the fiscal deficit target of three per cent of GSDP.