ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Fifteenth Finance Commission Award and the North-eastern States

This paper deals with the expected fiscal transfers to north-eastern states under the Fifteenth Finance Commission award. The analysis reveals that the ratio of central transfers has been declining. However, the structural disabilities of these states necessitates that the union government supplements the finance commission transfers with other budgetary support.

 

The recommendations of the Fourteenth Finance Commission to raise the share of tax devolution from 32% to 42% of the divisible pool (Finance Commission 2015: 90), have made metamorphic changes in the system of federal transfers to the north-eastern states (NES).1 Traditionally, the NES have an overwhelming dependence on central transfers, as they suffer from serious fiscal disabilities due to historical and structural reasons—a fact that has been widely acknow­ledged by the successive finance commissions. Insofar as the pattern of central transfers to NES is concerned, unlike other major states in the country, these states used to receive the bulk of the central resources through grants outside the finance commission transfers, but this got changed in the Fourteenth Finance Commission award period. For instance, grants other than finance commission transfers constituted 57.1% of the total central transfers to these states during the Thirteenth Finance Commission award period, and this sharply declined to 34.8% in the Fourteenth Finance Commission award period, with their share in shareable taxes of the union government increasing correspondingly (Table 1, p 70).

With the reduction in centrally sponsored schemes (CSSs) and modification of their funding pattern, along with statutory transfers prevailing over discretionary transfers in the Fourteenth Finance Commission award (Reserve Bank of India 2017; Bhattacharjee 2018), the finance commission transfers have become a significant source of revenue receipts of these states during the Fourteenth Finance Commission award period. This paper deals with the expected transfers to NES under the Fifteenth Finance Commission award. As a backdrop, we have discussed the salient features of state government fin­ances of NES, using the data available in the Fifteenth Finance Commissions volume 4 covering the last four years of the Thirteenth Finance Commission award period (2011–12 to 2014–15, henceforth referred to as period one) and the first four years of the Fourteenth Finance Commission award period (2015–16 to 2018–19, henceforth referred to as period two).

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Updated On : 17th Aug, 2021
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