Budget 2021

New money-sharing regime is in

The Union government’s decision to pass on a greater share of tax revenue to States had an immediate impact on Saturday’s budget, with transfers to the States going up and Central assistance to several major schemes declining. Budgetary allocations to major Central government departments, including the Education and Health ministries, fell as the States were given greater flexibility to spend at the State-level.

Earlier this week, Finance Minister Arun Jaitley announced that the government had accepted the recommendations of the 14th States’ share in the net proceeds of Union tax revenues from 32 per cent to 42 per cent. Simultaneously, the government would begin reducing its allocations to the State plan and wind up some Centrally Sponsored Schemes.

As a result, Budget 2015-16 has seen an increase in resources transferred to State governments and Union Territories, from Rs 6.93 lakh crore in 2014-15 to Rs. 8.5 lakh crore. The bulk of this increase is driven by a Rs 2 lakh increase in the States’ share in taxes. On the other hand, Central assistance to State plans has fallen by over 25 per cent.

For eight schemes and programmes, the Union government has completely stopped its budgetary support, the budget’s fine print shows. These include the Backward Regions Grant Funds, a scheme for the strengthening of panchayats, a scheme for the modernisation of police forces, and the National e-Governance Plan. States have to decide whether they would like to continue with the scheme or not.

For an additional 24 schemes, States will now have to shoulder a greater burden as the Union government takes a step back. These include flagship schemes, including the Swachh Bharat Abhiyaan, the National Health Mission, the Rashtriya Madhyamik Shiksha Abhiyaan, the Integrated Child Development Scheme, the National AIDS and STD Control Programme and the Rural Housing scheme.

Thirty-one schemes, including the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), the Mid Day Meal Scheme, the Sarva Shiksha Abhiyaan and scholarship schemes, will remain fully funded by the Central government.

As a result, there has been a rare fall in allocations for major Central government departments; the school education department’s budget fell by over Rs 13,000 crore, while the allocations for the Ministry of Women and Child Development and the Ministry of Drinking Water and Sanitation fell by 50 per cent as against the last budget, Yamini Aiyar, director of Accountability Initiative which tracks budgets, said. The Ministry of Panchayati Raj’s budget fell from Rs 3401 crore to Rs 95 crore, a fall that activist Aruna Roy described as “anti-rural, anti-poor”.

‘States must decide’

“We shouldn’t call it a fall. The money has gone to States and it is up to them to spend it on important sectors like health and sanitation,” an official of the Ministry of Drinking Water and Sanitation told The Hindu.

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Printable version | Jul 26, 2021 12:22:31 PM | https://www.thehindu.com/business/budget/new-moneysharing-regime-is-in/article6946564.ece

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