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14th Finance Commission - Final PDF
14th Finance Commission - Final PDF
www.visionias.in
Table of Content
5. Criticism
Social sector allotment is reduced.
Backward Regions Grant Fund (BRGF) is wound up. Bihar which got 30% weightage for funding through this
criterion will be badly affected. Bihar being among least developed states it is a matter of concern to the
economy. It is likely to affect the Gross Domestic State Product (GDSP) of Bihar adversely.
Pruning of Planning Commission to be NITI Ayog has led to loss of plan grants to states which are performing
well. Karnataka stands to lose plan grants. Rashtriya Krishi Vikas Yojna which contributed significantly to
agricultural productivity and transformation is removed through the process which will affect the sector. To
compensate for all this some extra funding will have to be mobilized by the GOI which caused it. States can
ask for higher untied grants for the reason.
With GOI revenue as a percentage of GDP is shrinking by 1% which makes devolution of funds to states
questionable. How the GOI estimates and plans to face its increasing expenditure in the situation is to be
seen. IT export income has declined to 6 year low this year due to inward bound policies of the west and
USA.
With back ward region grants discontinuation, absence of plan funds to states, reduction of social sector
funding and decline in central kitty will all lead to larger estimable inequities in the devolution of funds to
states in addition to other diversities. So there could be surging fiscal inequalities among the states. How
cooperative federalism can be ushered in given the situation is not clear.
May be 42% unconditional grants are expected to do the job. But this devolution will give a free hand to
states to operate the finances. Inequities with freedom to states are what could be expected.
Good amount of devolution is ordered to local bodies and more clarity of flow is also directed. But there is
no sanction against default in devolution of funds to local bodies. So as always, flow of funds to local bodies
is not ensured. There is no preventive measure against dependence on states either. A special body for
monitoring cooperative federalism is advised which may or may not happen.
In brief there is sacrifice of equity principle in the process of extending a flat unconditional grant of 42%.This
may cause federal chaos instead of cooperative federalism unless additional and strong institutional
arrangement is made to guard the objectives of the present governance.