Central Government Grants Rs.1,18,452 Crore to States

The Post Devolution Revenue Deficit Grant is a financial mechanism put in place by the Indian Central Government to support states that are unable to meet their revenue requirements after the devolution of taxes. This grant plays a crucial role in ensuring fiscal equality among states and maintaining a balanced economic development across the country. It is governed by the constitutional provisions and is administered by the Department of Expenditure based on the recommendations of the Finance Commission.

Understanding the Post Devolution Revenue Deficit Grant

The Post Devolution Revenue Deficit Grant is provided under Article 275 of the Indian Constitution, which empowers the Central Government to offer financial assistance to the states. This aid is particularly aimed at states that face a shortfall in their revenues after the distribution of central taxes. The objective is to enable these states to maintain essential services without compromising on fiscal prudence and efficiency.

Role of the Finance Commission

The release and the amount of the Post Devolution Revenue Deficit Grant are determined by the recommendations made by the Finance Commission, a constitutional body appointed every five years. The Commission assesses the financial position of each state, taking into account their revenue and expenditure patterns. Based on this assessment, it makes suggestions on the quantum of grants to be given to the states that need them. The 15th Finance Commission, for instance, has recommended significant grants to ensure that states can manage their finances effectively.

Allocation for FY2021-22

For the financial year 2021-22, the 15th Finance Commission has recommended the release of grants totalling Rs.1,18,452 crore. This substantial amount is set to benefit 17 states that have been identified as having a post-devolution revenue deficit. These grants are disbursed in monthly instalments, allowing states to plan their expenditures accordingly and avoid any potential financial crunch.

Disbursement Process

The disbursement of the Post Devolution Revenue Deficit Grant is managed by the Department of Expenditure, which is a part of the Ministry of Finance. The department ensures that the funds are released in a timely manner, usually in twelve equal monthly instalments. This systematic process helps in maintaining a regular flow of funds and aids the states in their budgetary planning and execution of developmental projects.

Criteria for Assessment

The assessment of revenue and expenditure, which forms the basis for the Finance Commission’s recommendations, involves a detailed analysis of various factors. These include the states’ own tax revenues, non-tax revenues, and the impact of the devolution of central taxes. Expenditure needs, such as those on health, education, and infrastructure, are also taken into account. The aim is to identify the gap between the states’ revenues and expenditures post devolution and provide adequate grants to fill this gap.

Significance of the Grants

The Post Devolution Revenue Deficit Grant is essential for maintaining fiscal stability in the states that receive it. It ensures that even those states with limited revenue-generating capacity are able to sustain essential public services. Moreover, it promotes equitable development across the country by providing more resources to states that need them the most. This is crucial for reducing regional disparities and fostering national unity.

In summary, the Post Devolution Revenue Deficit Grant is a vital fiscal tool that supports states in India to manage their finances effectively. It is based on a thorough analysis by the Finance Commission and is aimed at promoting balanced development across the country. The Department of Expenditure plays a key role in administering these grants, ensuring that they are released in accordance with the constitutional mandate and the Commission’s recommendations.