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Emerging Issues in Union–State Fiscal Relations
The restructuring of non-Finance Commission Grants is an improvement when it comes to scheme-related transfers. However, when 10 schemes constitute 90% of core grants, there is further scope for rationalisation of these schemes. The implications of following a sustainable debt path under the new Fiscal Responsibility and Budget Management framework in the budget indicate a larger fi scal correction at the state level vis-à-vis the union government.
The author gratefully acknowledges the invaluable research assistance provided by Shatakshi Garg.
In a multilevel fiscal system, the federal dimensions of the Union Budget cannot be ignored. Though discussions have so far concentrated on the macro-stabilisation aspects of the budget in terms of levels of deficits, debt and allocations for key sectors, including infrastructure, nothing much has been said about the implications of the Union Budget 2017–18 on transfers to states and on union–state fiscal relations. There are two specific aspects I would like to address in this article: First, what is the big picture emerging in union–state fiscal relations and the quantum of transfer with the abolition of the plan and non-plan distinction in the budget? Second, what are the likely implications of new Fiscal Responsibility and Budget Management (FRBM) framework indicated in the budget for states’ borrowings?
Quantum of Transfers
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