Does the Union Budget 2016-17 reflect the True Spirit of Fiscal Federalism in India?

Abstract

Decline unconditional statutory transfers; plan & non plan grants, less resource allocation through Centrally Sponsored Schemes with more revenue shares from the states as percentage of both Gross Tax Revenue and Gross Revenue Receipts proposed in Union Budget 2016-17 contradicts the objective of fiscal autonomy of the states envisaged in the Fourteenth Finance Commission recommendations. At the same time, the Centre’s net revenue receipts in FY 2016-17 is budgeted to increase mainly on account of Cess and Surcharges which is not part of the divisible pool. The central allocation in core of the core scheme has been reduced in Union Budget 2016-17 as compared to CSSs fully sponsored by the Centre. The higher central allocation in core schemes with funding pattern of 60:40 will add additional financial pressure on the State. The union Budget 2016-17 has undermined the fiscal autonomy of the states.