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Democratizing Debate on Development
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Section-6 State Finances and the Overall Budget If one looks at the issue of fiscal devolution, one gets disappointed to note that the amount allocated to states is even less than the amount government foregoes towards tax exemptions and incentives of various kinds it gives to the rich. While on the face of it, the amount transferred to states has increased over the years in nominal terms, as proportion of total tax expenditure, it has declined from around 92 percent in 2007-08 to 70 percent in 2008-09. Over last years allocation it has marginally declined from 5.5 percent of GDP to 5.4 percent of GDP in 2009-10 (See Table-33). Another noteworthy disturbing trend is that the increasing central government transfers to states that bypass the state governance system. Such expenditures occur primarily on account of central and centrally sponsored schemes. As proportion of total central transfers to states (excluding the amount of state share in taxes) the amount that bypass the state governance system account for around 36 percent in 2009-10 compared to around 17.5 percent in 2005-06. Table-33 State Transfers in the Union Budget between 2004-05 and 2009-10
Table-34 Central Government Transfer of Resources to States bypassing the State governance system
Note: Col-B: Total Central Government Expenditure for States and UTs does not include States’ Share in taxes. It includes Total Grants & Loans to states and UTs, Direct release of Central assistance for State/UT Plans to implementing agencies (MPLADS etc.), Direct releases under Central Plan to State/District level autonomous bodies/implementing agencies and Investments made from 'National Small Savings Fund' in Special State Government Securities; Col-C: Resources Bypassing the State Governance System include Direct release of Central assistance for State/UT Plans to implementing agencies (MPLADS etc.) and Direct releases under Central Plan to State/District level autonomous bodies/implementing agencies
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