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Jan-FISCAL FEDERALISM - Coggle Diagram
Jan-FISCAL FEDERALISM
P&HIS
Historical Evolution of Fiscal Federalism
GoI Act, 1919
introduced system of diarchy
dividing the administrative subjects
and source of revenue
into 2 categories
CG and Provincial
Simon Commission, 1927
reviewed GoI Act, 1919
recommended
establishment of federation of Indian States and Provinces
Expert Committee, 1931
with Lord Viscount Peel
as Chairman
examined fiscal relation
suggested
sharing of Income Tax btw Centre and provinces
fixing the share of Provinces
for period of 5 years
GoI Act, 1935
Based on
Lord Viscount recommendation
established
federal system
with provinces
and Indian States
as two distinct units
GoI Act 1919 and 1935
established
basic structure of fiscal federalism
in India
Central Transfers to States
in order to correct
vertical and horizontal imbalance
CG transfer funds to SG
General-Purpose transfers
untied funds
devolved to SG
via FC under Article 280
Specific Purpose transfers
tied funds
made by concerned
Central Ministries/Departments
in the form of
Centrally Sponsored Schemes
(CSS)
FC recommends
criteria for devolution of CG taxes to SG
principles for distribution of grand-in-aid
Transfers of Resources to Local Bodies
Article 243(I) & Article 243(Y)
necessitated State FC
to decide distribution of taxes btw
State, Municipalities and Panchayats
structural changes in CG financial relations
Increase in untied funds
FC-14
increased share of Union Tax
from 32% to 42%
underpins the objective
greater fiscal autonomy to States
Rationalization of CSS
CSS were reduced
from 66 to 28
funding pattern of core scheme
changed for large States to 60:40
flexibility for States
to use funds increased to 25%
End to Centralised
planning era and
Discretionary Grants
GST
working in exemplary manner
resonating co-op federalism
Outcome Based Budgeting
formulation of output outcome
framework for 68 Ministries/Dept.
along with Union Budget document
Role of NITI Aayog
On the premise that
Strong States make
a strong Nation
number of initiatives
taken by NITI
to foster co-op federalism
Governing Council of NITI Aayog
resolve differences and
plan common course to
progress and prosperity
providing
relevant technical advice to CG, SG, and UTs
established models and programmes
Centre-State partnership model
development of infrastructure
establish PPP
Development Support Services
to States and UTs
endeavored to
promote competitive federalism
Conclusion
Meeting the aspiration of States
foremost priority of Indian Fiscal Federalism
recent experience
tackling of COVID crisis
successful eg how CG and SG
worked together to fight the pandemic
New reforms required
in Public Financial Management System
mechanisms
to reward best performers
be it States or Districts
Once districts compete amongst themselves
States becomes stronger
When States compete amongst themselves
Nation becomes stronger
this will help us weaken
tendency for
competitive populism
and replace it with
competitive good governance
Context
Fiscal Federalism
financial relations btw
CG and other units of Government
represents
how expenditure and revenue
allocated across
different layers of govt administration