Following the recommendations of the 14th Finance Commission, the coming fiscal will see the states getting more money as the Centre decides to give 10% more funding from its divisible resource. Keeping the federal structure of the country intact, the Government accepted the Finance Commission Report, thus informing the Chief Ministers of the states about this new move.
The Commission, headed by former RBI Governor YV Reddy, submitted its report on December 15 that suggested passing 42% of net tax receipt to the states. Though this will mean a big drain on the finances of the Centre, the recommendation of finance commission is for changing the revenue-sharing between the Centre and the State. It has recommended a grant of over 1.94 lakh crore to meet the deficit of 11 States.
BJP has taken this recommendation in a positive way and said that implementation of schemes such as Rural Employment Guarantee would continue to be linked to Central support due to their importance and legal obligations.
Commenting on the report, DK Srivastava, former Finance Commission member and Chief Policy Advisor of EY India, said that the Commission’s recommendations would lead to a sea change in the architecture of Centre-State financial relations. “Overall, this will increase the efficiency of government resource, and State and local governments will understand their priorities better.â€
