States at Centre

GS-II: States at Centre

Context

In recent times, economic discussion in India has focused largely on the stress on central government finances. But state government finances are also facing headwinds.

State of states’ finance:

States increasingly account for a larger share in general government spending.
An RBI report on state finances notes that over the past two years, the overall size of state budgets has reduced. This may have “inadvertently deepened” the economic slowdown.
States have pegged their revenues to grow at a slower pace largely due to lower tax devolution and grants.
Revenue expenditure tends to be sticky in nature — rising due to higher interest and pension payments.
States have offset slower revenue growth by curtailing capital spending, which will lower overall public sector capex.
RBI report also notes that state debt to GDP has surged to 25%of GDP in 2019-20. Bringing it down to 20% as per FRBM review committee will be challenging.

Challenges facing state finances

The strains on state finances stem from several sources.
States are increasingly undertaking capital expenditure through state public sector enterprises.
States extend support to these enterprises through guarantees on their borrowings, “weak cost recovery mechanisms”, as in the case of the power and transport sectors, pose a fiscal risk.
Under UDAY agreements, states have to take over incremental losses of power discoms.
Sharp cuts in corporate taxes and sluggish GST collections will also impact tax devolution to states.
There are concerns over the fiscal costs of Ayushman Bharat.
The Centre has also asked the 15th Finance Commission to look into the possibility of providing funds for defence and internal security. These are likely to come at the expense of states.

Source: Indian Express

Join Our Telegram

Bharat 22 ETF

Trust Deficit

Pradhan Mantri Suryodaya Yojana

06 Feb, 24
SHARE

Recently, Prime Minister announced Pradhan Mantri Suryodaya Yojana under which 1 crore households will get rooftop solar power systems. India’s Status of Current Solar Capacity India currently stands at 4th place globally in solar power capacity. As per Ministry of New an

Foreign Contribution Regulation Act (FCRA)- NGO

06 Feb, 24
SHARE

The Foreign Contribution Regulation Act, 2010 (FCRA) registration of two prominent non-governmental organisations (NGOs) — Centre for Policy Research (CPR) and World Vision India (WVI) have been cancelled this month. What is FCRA? Key provisions of FCRA, 2010 Key aspects Description

Voice clone-AI

06 Feb, 24
SHARE

Voice clone fraud has been on the rise in India. AI voice cloning – It is the process of creating a synthetic replica of a person’s voice through machine learning and speech synthesis technology.It is called as voice deepfakesor audio deepfakes. Objective – To achieve a high level of na

Science communication- how to promote

06 Feb, 24
SHARE

Steps taken by India to promote Science Communication Publications and Information Directorate (PID) - An organisation under Council of Science and Industrial Research (CSIR) established in 1951 for publishing and disseminating scientific information in India. National science magazines- The PI

Universal Basic Income (UBI)- Analysis

05 Feb, 24
SHARE

Universal Basic Income (UBI) can strengthen welfare architecture and unlock the nation’s latent demographic potential. UBI - It is an income support mechanism typically intended to reach all or a very large portion of the population regardless of their earnings or employment status. Objective- To provide enough to co