Social sector allocations to states cut by half to promote cooperative federalism

News

• The central government has given more fiscal freedom to the states but they seem to be cutting allocations to social sectors, especially agriculture and allied areas in response, according to the initial findings of a study.
• The Narendra Modi administration wants to empower states further as part of a push toward cooperative federalism.
• Finance Minister Arun Jaitley’s February budget cut allocations to the states by more than half in 15 central agricultural schemes such as the Rashtriya Krishi Vikas Yojana (RKVY), National Mission for Sustainable Agriculture and irrigation and watershed management programmes.
• Jaitley said this wouldn’t leave the schemes without money because the states would chip in from the additional funds they receive as recommended by the 14th Finance Commission — 42% from the divisible pool of central taxes instead of 32%.

Key Point

• The move toward effectively transferring key social sector programmes along with an increase in their autonomy over budgetary resources can work only if state governments have adequate overall spending capacity.