Union Budget 2023–24 attempts to strike a balance between accelerating growth and achieving fiscal consolidation. The increased allocation to capital expenditure is important to crowd in private sector investment. However, the allocation to the Food Corporation of India and Bharat Sanchar Nigam Limited under capital expenditures is not likely to yield returns. On fiscal deficit reduction, more front-loading it’s adjustment in 2023–24 would have eased the problem of achieving the target of 4.5% of gross domestic product by 2025–26. Furthermore, the budgeted reduction is predicated on the assumption of significant compression in subsidies and transfers. Ultimately, the success of the intentions depends upon implementation.
While trying to balance the competing demands from the union and the states, the Fifteenth Finance Commission has done a commendable job, but has also sacrificed objectivity at times.
This paper deals with the expected fiscal transfers to north-eastern states under the Fifteenth Finance Commission award. The analysis reveals that the ratio of central transfers has been declining. However, the structural disabilities of these states necessitates that the union government supplements the finance commission transfers with other budgetary support.
This analysis suggests that climate change criterion in the intergovernmental fiscal transfer mechanism in India is a significant step to incentivise the conservation of forests. However, the macropolicy channel of this link is through the public expenditure priorities related to climate change commitments by the state governments.
The Fifteenth Finance Commission has trodden carefully in dealing with the controversial terms of reference issued to it in the presidential order. The commission had the challenging task of dividing fiscal resources between the union and the states due to the serious uncertainty posed by the pandemic. In many ways, the recommendations of the commission marks continuity. Devolution of 41% in the divisible pool of taxes to the states, despite the nudging of the centre in the terms of reference to review it and the continuation of revenue deficit grants, are some examples. The phasing out of the revenue deficit grants to the states in the next five years is likely to pose challenges to the fiscally weak states. The conditionalities mandated for availing local body grants may deny the much-needed money for them as the states may not have the incentive to undertake the reforms unless the public pressure builds up. On the whole, the report of the commission is on expected lines; it does not disappoint but all the same, like the previous commissions, it is a work in progress.
The fiscal consolidation projections provided by the Fifteenth Finance Commission, including its alternative paths, have been rendered out of alignment because of the COVID-19’s deleterious economic impact.The commission has also recommended that the centre’s Fiscal Responsibility and Budget Mana
The two latest finance commissions—the Fourteenth Finance Commission and the Fifteenth Finance Commission—mark a break from the past. The paper explores the structural shift in federal finances with the abolition of the Planning Commission and contemporaneous circumstances that shaped the approach of the Fifteenth Finance Commission and examines the intersections and divergence, continuity and change with the Fourteenth Finance Commission in terms of its treatment of and approach to the three core issues of vertical and horizontal devolution, grants-in-aid to the states and transfers to local governments. It argues that the pervasive impact of the pandemic has shaped the recommendations of the Fifteenth Finance Commission in several ways without compromising on the constitutional principles and retaining the balance in federal transfers between the union and the states and amongst the states. At a time when the growth prospects of the economy are uncertain, the innovative use of targeted grants linked to performance-based criteria for specified sectors through the states and local governments addresses glaring gaps in public services and potentially trigger reform in critical sectors.
The objective of this paper is to understand the core recommendations of the Fifteenth Finance Commission in the context of COVID-19 pandemic. Given the macroeconomic uncertainties and rising fiscal needs, the commission focused on fiscal stability, equity and enhancement of fiscal space through higher borrowing with a fiscal exit plan for both union and states.
The first report of the Fifteenth Finance Commission has allayed many fears that arose after the notification of the terms of reference of the commission. The main report for the period 2021–22 to 2025–26 will have to factor in the devastating impact of COVID-19 on the economy and provide adequate fiscal space to the states for socio-economic response and recovery.
An assessment of the resource gaps for fulfilling the right to education across Indian states presents a disconcerting picture. The gap between normative requirement and actual expenditure is particularly large in the poorer states, requiring not only a higher overall fiscal push, but one that would address the unequal positions of the states. Since equalisation is the primary mandate of the Finance Commission, it should address the inequalities in provision of elementary education, which is a merit good plus a core constitutional guarantee. To meet the special needs of the 16 focus states with the largest additional requirement vis-à-vis their revenue base, it is important that the Fifteenth Finance Commission responds with specific purpose grants of an adequate magnitude for elementary education.
