Friday, 11 July 2014

Budget 2014-15: A stronger case of cooperative federalism?

Honestly, this does not deserve a separate post-at best a comment on the Firstpost page where this article was published. But if you are a regular visitor on the website (does it say something about me that I am?), you would know how the regular commenters there do I say it politely...moronic.
Anyway, the facts stated in the article are accurate enough. That is, as Jagannathan notes, there has been a  "...massive transfer of fiscal implementation power to states in just one year. In P Chidambaram’s last fiscal year (2013-14), states got Rs 1,19,039 crore out of the Rs 4,75,532 crore plan outlays; this year (2014-15), they get a huge Rs 3,38,408 crore from the total plan kitty of Rs 5,75,000 crore."
Essentially, there are two ways in which states can receive funds- Centrally sponsored schemes (CSS) and Central Assistance to State and UT plans. CSS schemes come with certain strings attached. Namely, states have to make proportionate expenditure contribution to the scheme if they are to access CSS funds. On the other hand, Central Assistance comes in two forms-Normal Assistance and Additional Assistance. Additional assistance funds are scheme-based. However, Normal Central Assistance are not tied to any specific schemes. Transfers to states depend on the Gadgil-Mukherjee formula which uses criteria like population, per capita income, fiscal discipline and special problems of the state to determine how funds are to be transferred. Once received, states can work with these funds in the manner that suits the state, on schemes that are tailored to the states’ specific needs.
However, the writer is being disingenuous when he says that,
"The one-cap-fits-all approach of the UPA years, dictated by dynastic and centralising feudal considerations, is now being whittled down by a former state chief minister who is now prime minister."
In fact, the almost three-fold jump seen in Central Assistance to State and UT plans (and a corresponding decline in allocations under CSS as reflected by the Gross Budgetary Support to States) under Jaitley's 2014-15 budget, mirrors the allocations made by Chidambaram's interim budget of 2014-15. He, of the party "dictated by dynastic and centralising feudal considerations". To be fair, the budget document itself does not claim to reversing any trend of "de-federalising a federalising trend that had begun earlier in the last decade". Rather, it maintains that it is continuing with the restructuring of CSS, as suggested by the B K Chaturvedi committee report.
Just goes to show that media coverage needs to be taken with a heavy dosage of salt.

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