Recent Changes Impacting Transfer of Resources

♤ With the abolition of Planning Commission, the model of grants tied to Five Year Plans (FYP) has been done away with (12th FYP which ended in 2017 was the last in series). The grants which were hitherto transferred through Planning Commission are now routed through Finance Ministry.

♤ Goods and Services Tax (GST) has subsumed a number of central and state indirect taxes and provided for a Goods and Services Council. But there has been criticism that it has led to an adverse effect on the fiscal position of the states. Accordingly, it has been provided that the Parliament may by law and with the recommendation of the GST Council, will provide compensation to the State on account of implementation of the GST.

♤ Restructuring of Central Sponsored Schemes: Starting from the FY 2016-17, the schemes of Centrally Sponsored Schemes (CSS) have been reduced drastically. The reduction in the number of schemes coupled with the increase in devolution of resources by the 14th Finance Commission reduces the dependency of States on the Centre. It also facilitates the State Governments in designing schemes as per their needs.