States at Centre

GS-II: States at Centre

Context

In recent times, economic discussion in India has focused largely on the stress on central government finances. But state government finances are also facing headwinds.

State of states’ finance:

States increasingly account for a larger share in general government spending.
An RBI report on state finances notes that over the past two years, the overall size of state budgets has reduced. This may have “inadvertently deepened” the economic slowdown.
States have pegged their revenues to grow at a slower pace largely due to lower tax devolution and grants.
Revenue expenditure tends to be sticky in nature — rising due to higher interest and pension payments.
States have offset slower revenue growth by curtailing capital spending, which will lower overall public sector capex.
RBI report also notes that state debt to GDP has surged to 25%of GDP in 2019-20. Bringing it down to 20% as per FRBM review committee will be challenging.

Challenges facing state finances

The strains on state finances stem from several sources.
States are increasingly undertaking capital expenditure through state public sector enterprises.
States extend support to these enterprises through guarantees on their borrowings, “weak cost recovery mechanisms”, as in the case of the power and transport sectors, pose a fiscal risk.
Under UDAY agreements, states have to take over incremental losses of power discoms.
Sharp cuts in corporate taxes and sluggish GST collections will also impact tax devolution to states.
There are concerns over the fiscal costs of Ayushman Bharat.
The Centre has also asked the 15th Finance Commission to look into the possibility of providing funds for defence and internal security. These are likely to come at the expense of states.

Source: Indian Express

Join Our Telegram

Bharat 22 ETF

Trust Deficit

Formation Day

03 Dec, 25
SHARE

On 1st November, eight Indian states—Andhra Pradesh, Chhattisgarh, Haryana, Karnataka, Kerala, Madhya Pradesh, Punjab, and Tamil Nadu—along with five Union Territories—Andaman and Nicobar Islands, Chandigarh, Delhi, Lakshadweep, and Puducherry—celebrate their Formation Day. This date marks an important milestone in India

Turtle (Kachhua) Wildlife Sanctuary

02 Dec, 25
SHARE

The Turtle Wildlife Sanctuary, also known as the Kachhua Sanctuary, is located in the Varanasi district of Uttar Pradesh. It is recognised as India’s first freshwater turtle wildlife sanctuary, established to conserve endangered turtle species and support the ecological health of the Ganga River. Location and Extent The sanctuary co

Introduction of AI and Computational Thinking (CT) in

02 Dec, 25
SHARE

The Ministry of Education plans to introduce Artificial Intelligence (AI) and Computational Thinking (CT) from Class 3 onwards in the 2026–27 academic year. This initiative is part of the National Curriculum Framework for School Education (NCF-SE) 2023 and aligns with the National Education Policy (NEP) 2020. The aim is to prepare student

Sal Tree

02 Dec, 25
SHARE

Scientists from the Environment Department of Himachal Pradesh University (HPU) in Shimla have recently revealed that the Sal tree (Shorea robusta) is the most effective natural air purifier for combating rising pollution levels. Their findings highlight the tree’s superior capacity to trap dust, absorb gases, and cleanse the air compared

US Resumes Nuclear Weapon Testing

02 Dec, 25
SHARE

The President of the United States has ordered the resumption of nuclear weapon testing after a gap of 33 years, the last test being in 1992. This decision marks a significant shift in global nuclear policy and has far-reaching implications for geopolitics, the environment, and international security. Status of Global Nuclear Weapon Testing