Articles by N J Kurian

This article discusses the issues that the Thirteenth Finance Commission has to address to enable it to design a scheme of transfers that is just and fair to all states. A significant fiscal correction took place in most states over the last four years. The most important trend that has emerged is the differing significance of transfers to the rich and poor states. It is imperative that the thFC accepts the concept of equalisation as the guiding principle in deciding transfers. Another issue it may have to address is the mix of tax share and grants.

The Twelfth Finance Commission has made significant recommendations on debt relief for states. The quantum of relief is substantial and the conditionalities - passage of a fiscal responsibility legislation and reduction of revenue deficits - are not unreasonable. However, single-minded pursuit of fiscal correction to get the benefit of debt relief can have disastrous implications for states where social and economic infrastructure investments have been insufficient. Some of them will have to impose heavy cuts on development expenditure to adhere to the tight schedule to bring down the revenue deficit to zero by 2008-09. A more rational approach may have been to allow them to follow more realistic adjustment paths over a longer period.

This paper attempts to bring out the deteriorating trend in state finances in recent years, in particular during the last two years. Failure to contain wasteful expenditure and reluctance to raise additional resources on the part of the states are the main causes. Tax wars among state governments to attract private investments in the wake of economic reforms as well as competitive populism on the part of ruling parties and contenders for power led to this. The last blow has been the pay revision of employees forced upon the state governments by the centre's unilateral decision to implement Fifth Pay Commission Report. Consequently, states are starved of funds to meet the essential investment needs in social and infrastructure sectors. Large borrowings are resorted to by several states just to meet the current expenditure. Almost all the indicators of fiscal health of the state economies are steadily deteriorating. The paper reaches the conclusion that unless drastic measures to correct the situation are resorted to without delay, finances of several states will collapse.

N J Kurian To issues which are being much debated today in the context of the Eighth Plan are decentralised planning and the involvement of panchayati raj bodies at various levels in the implementation of anti-poverty programmes. These are vital issues which can make a spectacular difference to the effectiveness of the anti-poverty programmes. The focus of this article is on the Integrated Rural Development Programme.