(Kindly refer the document of Fiscal Policy for more details on FRBMA.)

5. Recent Changes in Union Budgeting

5.1. Budget 2016-17

5.1.1. Rationalization of Centrally Sponsored Schemes (CSS) and expenditure Thereon

Budget 2016-17 introduced a new classification system for the Centre’s spending, based on the

categorization of CSS, pruning the existing 66 CSSs to 28, and then further divided them into

three categories—six ‘core of the core’ schemes, 20 core schemes, and two optional schemes.

The classification is discussed as under:

1. Core of the Core: Those schemes which are for social protection and social inclusion should form the core of core and be the first charge on available funds for the National Development Agenda. Under the new classification, six schemes are classified as Core of the Core, including MGNREGA and all the umbrella schemes for the upliftment of minorities, Scheduled Castes, and Scheduled Tribes.

As per the new system, the Core of the Core schemes are of highest priority, and thereby will retain their expenditure allocation framework. For example, MGNREGA had 75 per cent of the material expenditure from the Centre and 25 per cent from the states.

2. Core: Focus of CSSs should be on schemes that comprise the National Development Agenda where the Centre and States will work together in the spirit of Team India. The Core schemes, 20 in number, include schemes as far-ranging as the Krishi Unnati Yojana, the Smart Cities programme, and the modernisation of the police force. These are second in priority and will have a 60:40 formula of expenditure.

3. Optional Schemes: It includes all those schemes, presently two in number, which a particular state feels necessary considering its level of socio-economic development. These will have a 50:50 formula, with the states having the flexibility to decide whether to invest in these or not.

This system was put in place on the recommendations of a sub-committee of Chief Ministers formed by Niti Aayog for the rationalisation of the CSS.