ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Manish GuptaSubscribe to Manish Gupta

Will UDAY Brighten Up Rajasthan’s Finances?

Fiscal prudence in most countries, including India, is focused on general government deficit. Though there is strong merit in focusing on the public sector borrowing requirement (PSBR) to judge fiscal health, paucity of data and its timeliness always prevented having a consolidated view of public...

State Level Debt–Deficit Dynamics

An analysis of the debt and deficit of states based on the budget estimates of 2016–17 shows that almost half of them have a fiscal deficit target higher than the limit set in the Fiscal Responsibility and Budget Management Act. These states need to focus on the quality of expenditure and elimination of revenue deficit as per the framework proposed by the Fourteenth Finance Commission to enhance state-level capital spending.

Evolving Centre–State Financial Relations

After the Fourteenth Finance Commission award, aggregate transfers as a percentage of gross domestic product has increased, while grants as a percentage of GDP has declined. The centre is resorting to cess and surcharges that are not shared with the states. This would mean denial of revenue to states, which goes against the spirit of the Constitution. Further, the states have a reduced untied fi scal space, with the union’s share in Centrally Sponsored Schemes in 2016–17 (BE) being reduced. Finally, in the absence of plan transfers, post 2017–18, the focus should be to develop a framework for non-fi nance commission grants to states which is predictable and certain.

Preserving the Incentive Properties of Statutory Grants

This paper investigates flows from the centre in respect of the two-part grant for local governments prescribed by the Thirteenth Finance Commission with unconditional and conditional components, covering 2010-15. There is evidence that fiscal compulsions at the centre bent the structure of the grant away from that envisioned by the TFC, and that its incentive properties were thereby not preserved. Local governments are the nodes at which the sustainable development goals for improved sanitation and public health have to be delivered. This is the level at which public finance attention has to be focused.

Revenue efforts of panchayats: evidence from Four states

There is no standing national database on panchayat finances in India, which limits any meaningful analysis of the revenue effort of panchayats. Based on a field survey in the four states of Chhattisgarh, Madhya Pradesh, Rajasthan and Orissa, this paper studies the own revenue effort of rural local bodies within their statutorily defined revenue rights. The study finds that the assigned tax rights are not fully utilised by the panchayats and non-tax revenue is the dominant source of their own revenue. A comparison of own revenues of the panchayati raj institutions for 2005-06, based on the survey results with those reported by the Twelfth Finance Commission for 2002-03, shows a huge difference between the two sets in the case of per capita own tax in Madhya Pradesh and per capita own non-tax in Chhattisgarh.

Central Flows to Panchayats

Central flows to panchayati raj institutions consist of assistance through centrally sponsored schemes, and transfers based on recommendation of Central Finance Commissions. The CSS are of two types, one routed through state government budgets, and the other bypassing state budgets. The paper quantifies these and identifies the components of the second going to panchayati raj institutions. For Madhya Pradesh and other major states, the paper provides per capita estimates of CSS releases to the PRIs for 2004-05 and 2005-06.
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