Centre cuts share, Kerala left to fill in
The states will have to pick up the tabs for 40 percent of the allocation.
THIRUVANANTHAPURAM: Arun Jaitley has put Thomas Isaac in trouble just days before the presentation of the State Budget. Already the growth in state’s revenues has sunk below subterranean levels, and now the Union finance minister has reduced Centre’s transfers to the state. Jaitley, in his budget presentation, has made it seem as if he has been overly generous with central transfers to the states, raising it from Rs 99,0311 crore (2016-17) to Rs 1,08,5074 crore (2017-18).
But figures are highly deceptive. Taken as a percentage of GDP, the transfers have actually declined; from 6.48 percent to 6.35 percent. The drop for the next fiscal comes right after a dramatic rise in transfers from 2015-16 to 2016-17, from 6.02 percent to 6.48 percent. States also have the problem of burgeoning committed expenditures, as the Centre has considerably reduced its share in Centrally Sponsored Schemes (CSS).
For instance, flagship projects like ICDS, National Rural Health Mission and Sarva Shiksha Abhiyan, which had a Centre-State participatory ratio of 90:10, has now been revised to 60:40. Meaning, the states will have to pick up the tabs for 40 percent of the allocation. On the face of it, the state has not really lost central funds. What it has lost by way of money for CSSs, it looks to have gained by a higher devolution of union taxes. From 32 percent, the 14th Finance Commission has increased the share of shareable pool of central taxes to 42 percent. What’s more, being a revenue deficit state, Kerala has been provided a special grant of Rs 9,519 crore.
The central devolution to the state for five years beginning 2015-16 will be Rs 1.2 lakh crore; up from Rs 40,000 crore for the last quinquennial (2010-11 to 2014-15). The 'special assistance' will be Rs 95,19 crore for three years; Rs 4,640 crore in 2015-16, Rs 3,350 crore for 2016-17, Rs 1,529 crore for 2017-18. However, policy planners are not sure whether the state will employ the increased allocation for core welfare programmes. “For the state, the prime concern will be to bring down the deficit. Instead of swelling the welfare budget, they will use the money to rein in the deficit,” said tax expert Jacob Thomas.