“States being closer to the people bear the brunt of developmental expenditures, yet their fiscal autonomy is increasingly constrained”. Examine the role of the Finance Commission in addressing this issue.
Kartavya Desk Staff
Topic: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances
Topic: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances
Q3. “States being closer to the people bear the brunt of developmental expenditures, yet their fiscal autonomy is increasingly constrained”. Examine the role of the Finance Commission in addressing this issue. (15 M)
Difficulty Level: Medium
Reference: TH
Why the question The Government of Tamil Nadu recently hosted the Sixteenth Finance Commission, which was chaired by Arvind Panagariya. The Commission is uniquely positioned to address the critical fiscal challenges facing India and rectifying the skewness in the relationship between the States and the Union. Key Demand of the question Explain the developmental expenditure burden on states, analyze the factors constraining their fiscal autonomy, and examine how the Finance Commission can address these challenges. Structure of the Answer Introduction Briefly introduce the importance of states in India’s federal structure and their role in developmental responsibilities, while highlighting the fiscal constraints they face. Body States and developmental expenditures: Highlight key areas like health, education, and infrastructure where states bear significant financial responsibilities. Constraints on fiscal autonomy: Explain issues like reduced devolution, rigid centrally sponsored schemes, and dependence on Union transfers. Role of the Finance Commission: Suggest measures like increasing vertical devolution, rationalizing cess and surcharge use, and reforming horizontal devolution criteria. Conclusion Conclude with the need for the Finance Commission to strike a balance between fiscal equity and autonomy to ensure sustainable and inclusive growth across states.
Why the question The Government of Tamil Nadu recently hosted the Sixteenth Finance Commission, which was chaired by Arvind Panagariya. The Commission is uniquely positioned to address the critical fiscal challenges facing India and rectifying the skewness in the relationship between the States and the Union.
Key Demand of the question Explain the developmental expenditure burden on states, analyze the factors constraining their fiscal autonomy, and examine how the Finance Commission can address these challenges.
Structure of the Answer
Introduction Briefly introduce the importance of states in India’s federal structure and their role in developmental responsibilities, while highlighting the fiscal constraints they face.
• States and developmental expenditures: Highlight key areas like health, education, and infrastructure where states bear significant financial responsibilities.
• Constraints on fiscal autonomy: Explain issues like reduced devolution, rigid centrally sponsored schemes, and dependence on Union transfers.
• Role of the Finance Commission: Suggest measures like increasing vertical devolution, rationalizing cess and surcharge use, and reforming horizontal devolution criteria.
Conclusion Conclude with the need for the Finance Commission to strike a balance between fiscal equity and autonomy to ensure sustainable and inclusive growth across states.