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The Union and the States in India

The financial and fiscal relations between the Center and the states have been explained in chapter 1 of the Constitution. The financial instruments between the union and the states have been divided. In the Indian constitution, this division is based on the division made in the Act of 1935. According to the current division some ‘tax’ has been handed over to the state governments only. State governments themselves collect taxes imposed by themselves and spend that money on their own to fulfill their needs. Under Article 266, accumulated funds and public accounts of India and the states have been established. Three types of grant-in-aid are provided to the States under Article 273, 275 and 282 of the Constitution. According to Article 280, the distribution of net proceeds of taxes between the Union and the States, allocation of such proceeds between states, from the accumulated fund of India, the principles governing grants in states revenue, Regarding the necessary remedies of a state’s fund for the fulfillment of the resources of the panchayats municipalities in the states, the Finance Commission firstly writes to the state governments and tells them to assess their income from the general revenue expenditure and revenues in the next five years. . Once the assessments are received, the finance commissions are formed only to check their credibility and for clarification, with the concerned officials of the States, etc. for clarification.

In the last five decades, the Central Government has accepted the recommendations of almost all the finance commissions. These commissions have consistently recommended increasing the share of revenue considering the financial problems of the State Governments. The 80th Constitutional Amendment Act, 2000 has changed the revenue distribution between the Union and the States. This amendment also states that all taxes and duties specified in the Union List will be split between the Union and the States. Policy Commission has been set up to strengthen cooperative federalism. NK formed on FRBM Act Due to the recommendations of the Lion Commission, the fiscal relations of the Central and the States have also been affected. This commission is suggesting that a fiscal council should be established which can play a monitored role along with fiscal forecasts.

In recent years, there have been several such suggestions which have strengthened financial federalism between the Union and the states. Y.V. The 14th Finance Commission headed by Reddy, in its report, suggested to increase the share of states in central revenue from 32% to 42%, which has been accepted by the central government. This will increase the transfer of funds from the center to the states unconditionally and all types of transfer is likely to reach 45% level. This will create fiscal space and will improve the financial position of states, With the availability of unconditional resources, financial autonomy of the states will also increase. More than 50% of the revenue transferred to the states in 2015-16. Of course, with the increase in the share of states in central revenue, the availability of resources will be affected for the center. In view of this, the Finance Commission suggested closure of eight schemes being run by the Center in its report and recommended a large reduction in contribution made by Center for many Centrally sponsored schemes. The suggestion for withdrawal of central support from twenty centrally sponsored schemes was suggested. Modernization of Police Forces, Rajiv Gandhi Panchayat Empowerment, Clean India Mission, It was suggested to close plans like National Food Processing, which is likely to block the process of socio-economic insertion. In this report, it is recommended to eliminate the classification of general states and special status states.

In the same report, an amount of Rs 1.94 lakh crore was provided to eleven states to compensate the revenue deficit after the transfer. The Commission emphasized the expansion of the interregional council to strengthen the sentiments of collaborative federalism and it was expected that it would identify specific grants for the states. To reassure the states, the Commission suggested setting up an autonomous GST compensation fund through legislative action. It recommended compensation of 100% during the first three years, 75% during the fourth year and about 50% compensation in the fifth year.

The Fourteenth Finance Commission also suggested amendment in the revenue-distribution formula. Where the thirteenth Finance Commission gave 25% weightage to the population in the distribution of revenue, the 14th Finance Commission increased it to 27.5%. The 13th Finance Commission laid the basis for the distribution of revenue to the 1971 population, while the 14th Finance Commission gave 17.5% of the weighted population of 1971 and the population of 10%, 2011, the benefit would be given to those states, including Uttar Pradesh, Bihar where the population And where the population growth rate was more than the other states between 1971-2011. The thirteenth finance commission gave a 10% weightage to the area, while the 14th Finance Commission would have 15% weightages, the benefit would be to those states which are of big size. The 13th Finance Commission gave a 17.5 percent weightage to the fiscal discipline, but the fourteenth Finance Commission replaced the fiscal discipline with the expansion of forest areas to 7. Given 5% weightage, which showed his indebtedness towards sustainable development. It will be benefited by states like Andhra Pradesh, Chhattisgarh, Madhya Pradesh, Karnataka and Jammu and Kashmir.

The 14th Finance Commission intervenes effectively in the state-of-the-state relations. This commission has strengthened the status of Panchayats along with the states. It will limit the intervention of the Center in the empowerment of the states in relation to the use of resources, as this will result in 70% of the revenue transfer unconditionally. More resources will be available to the less developed and low GDP-based states of this commission. Due to this report the focal space of the Center is being limited, due to which the public spending on the social sector is being cut. Secondly, the center is now handing over the responsibilities of the social sector to the states, while in this context, the states have neither experience nor expertise.

If it is a positive side, if it is a positive aspect, in the use of resources in the use of resources, then the end of classification of general category and special status states and discontinuance of the backward region grant fund will discourage the prospects of balanced and inclusive growth. The formation of the Policy Commission, behind which there is a sense of strengthening cooperative federalism, its governing council comprises Chief Ministers of all the States and the Lefriedant Governor of the Union Territories. The policy commission neither plans the states without asking them nor does it impose on them the states. G-S-T will also make a lot of difference on the state’s fiscal situation. G.T.T. After tax, the state governments will recover where the product is consumed. Therefore, less developed states like Uttar Pradesh and Bihar will get more resources, Because there is a large number of consumers there. Fuel, real estate and excise duties, which are considered important for state government’s revenue, are different. The government has also changed the rules of royalty payment. VAT, entertainment tax, luxury tax, lottery tax, entry tax, taxation, etc., which are available to the states, will end now.

The Policy Commission has brought an index (health, education and water management) to measure the performance loss of States so that the results of the social programs of the states can help them compete with each other and share innovations.

Interstate common inequality is constantly increasing. The annual income of a person living in Tamil Nadu is four times more than the person living in Bihar. G.T.T. There is such a possibility that this disparity can increase further. Already, this sector, which is economically backward, could invite companies to tax on their own but now it will not be possible because they have to pay the same rates as other states. This is a major regressive step of new economic measures.

Some financial critics are also saying that the state will lose its fiscal autonomy due to GST because they will not be able to tax as per their requirement; But the way the compensation has been provided, it denies this fear. N.K. about FRBM The Lions Committee has suggested the formation of a fiscal council which will be an independent body. It will monitor the government’s revenue announcements for any given year. This will further strengthen the state’s position in fiscal policies because the tradition of debt forgiveness and the burden of such popular schemes is now gradually ending.

It can be concluded that N.K. Report of the Leo Committee, Report of 13th and 14th Finance Commission, establishment of Policy Commission and some of its steps and G.T. With the implementation of the central and state’s fiscal relations have been very impressive. On one hand, where these steps are gradually providing fiscal autonomy to the states, on the other hand, they are also working to make the states accountable and accountable. This strengthens the spirit of cooperative federalism.

Updated: October 17, 2018 — 3:52 pm

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