definite message that Union Finance Minister Arun Jaitley HE MOST gave out in budget 2015-16 was that the Centre will share funds for development schemes with states, but the autonomy which states have been demanding for decades will come at a cost. The budget, as well as the decisions taken by the National Democratic Alliance in the run up, show that the Centre is willing to fund states if they are ready to take responsibility for implementing schemes effectively.
It is pouring money for states. Just days before the budget, the government accepted the 14th Finance Commission recommendation that awarded 42 per cent of the Central tax pool to states, an increase of 10 per cent from the current share. This means states will get 5.24 lakh crore in 2015-16. An additional 3.04 lakh
` ` crore will be given to states through grants and plan transfer (see ‘States at centre’).
But with money comes responsibilities. The Centre has decided to retain support for programmes that are a national priority, such as poverty alleviation, while giving states the responsibility to implement others with yet-to-be-finalised budget-sharing mechanism.
The Central government will stop funding eight programmes, including the Backward Region Grant Funds in operation in 250 districts and the National Mission on Food Processing. It will support 31 Centrally-sponsored schemes while 24 will be implemented with states bearing more costs. Under this new mechanism, programmes such as the National Rural Drinking Water Programme and Swachh Bharat Abhiyan will be funded by the Centre and programmes such as the Mahatma Gandhi National Rural Employment Guarantee Scheme (mgnregs) will continue to get full Central assistance.
This change in stance of the Centre was reflected in Prime Minister Narendra Modi’s recent letter to chief ministers in which he said: “In this overall context, when you are flush with resources, I would like you to have a fresh look at some of the erstwhile schemes and programmes supported by the Centre. States are free to continue or change these schemes and programmes as per their discretion and requirement.”
But will the states be able to handle this deluge of resources? They may be rejoicing at this windfall, but their worry starts from here. With massive funds, states need to urgently set up the institutional mechanism to manage this responsibility. They have been grappling with unspent budget allocations for various social sector programmes. One of the reasons for this is the absence of capacity at the states’ level to implement programmes. As currently most development programmes are routed through the panchayats, states need to increase institutional capacity of the local bodies in a big way. States and panchayats continue to fight each other over delayed
Central government share
Industry representatives listening to the budget speech in Delhi on February 28