{"id":122073,"date":"2021-07-29T18:34:15","date_gmt":"2021-07-29T13:04:15","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=122073"},"modified":"2021-09-08T17:28:56","modified_gmt":"2021-09-08T11:58:56","slug":"oxygen-for-fiscal-federalism","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/oxygen-for-fiscal-federalism\/","title":{"rendered":"Oxygen for fiscal federalism"},"content":{"rendered":"<p><b>Source<\/b><span style=\"font-weight: 400;\">: <a href=\"https:\/\/epaper.thehindu.com\/Home\/ShareArticle?OrgId=G0T8QK76H.1&amp;imageview=0\" target=\"_blank\" rel=\"noopener\">The Hindu<\/a>\u00a0<\/span><\/p>\n<p>Relevance: This article focuses upon the aspects of Fiscal federalism in India.<\/p>\n<h5><b>Synopsis<\/b><span style=\"font-weight: 400;\">:<\/span><\/h5>\n<p><span style=\"font-weight: 400;\">A special GST rate could be levied by using the power under Article 279A. This would enable the States to raise more resources during the pandemic.<\/span><\/p>\n<h5><b>Background<\/b><span style=\"font-weight: 400;\">:<\/span><\/h5>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">India has a federation with a strong centralizing policy. Nonetheless, India maintained its limited federal characteristics for a fairly long time.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">However, many experts now feel that federal characteristics are being threatened and undermined in recent times.<\/span><\/li>\n<\/ul>\n<h5><b>Undermining Federalism:<\/b><\/h5>\n<ul>\n<li style=\"font-weight: 400;\"><b>First<\/b><span style=\"font-weight: 400;\">, the Goods and Services Tax (GST) law assured States <\/span><b>a 14% increase in their annual revenue <\/b><span style=\"font-weight: 400;\">for five years (up to July 1, 2020).\u00a0<\/span><span style=\"font-weight: 400;\">However, the Union government has <\/span><b>deviated from the statutory promise<\/b><span style=\"font-weight: 400;\"> and has been insisting that States avail themselves of loans.\u00a0<\/span><span style=\"font-weight: 400;\">Kerala is entitled to a GST compensation of Rs. 4,041 crore for the financial year 2020-21. But the Union government has been disregarding this obligation.\u00a0<\/span><\/li>\n<li><b>Second, last year, the Union government increased the borrowing ceiling of the States from 3% to 5% for FY 2020-21.<\/b><span style=\"font-weight: 400;\">\u00a0<\/span><span style=\"font-weight: 400;\">But the conditions are attached to 1.5% out of this 2% increase of ceiling. States will have to bear the burden of welfare and relief measures during the pandemic.<\/span> These conditions<span style=\"font-weight: 400;\"> go <\/span><b>against the principle of cooperative federalism<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Third<\/b><span style=\"font-weight: 400;\">, the 15th <\/span><b>Finance Commission<\/b><span style=\"font-weight: 400;\"> had recommended Rs. 2,412 crore as a sector-specific grant and Rs. 1,100 crore as a State-specific grant for Kerala. <\/span><b>But this amount has not been released.<\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Fourth<\/b><span style=\"font-weight: 400;\">, the expenditure rules attached to t<\/span><b>he Disaster Management Fund are unviable<\/b><span style=\"font-weight: 400;\">. This inhibits the state&#8217;s discretion in doing disaster-related expenditures.\u00a0<\/span><\/li>\n<\/ul>\n<h5><b>Suggestions<\/b><span style=\"font-weight: 400;\">:<\/span><\/h5>\n<ul>\n<li style=\"font-weight: 400;\"><b>The present GST compensation period will end in 2021-22.<\/b><span style=\"font-weight: 400;\"> Beyond this period, it is going to be very difficult to convince the Union government to provide compensation, as there is no constitutional obligation to do so to the States.<\/span>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The Union government can consider using its powers under <b>Section 4(f) of Article 279A <\/b><\/span><span style=\"font-weight: 400;\">to raise additional resources during the pandemic.<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Section 4(f):<\/b><span style=\"font-weight: 400;\"> It enables the Goods and Services Tax Council to make recommendations on any special rate or rates for a specified period. In order to raise additional resources during any natural calamity or disaster.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\"><b>The future interest liability of loans<\/b><span style=\"font-weight: 400;\"> should not be placed on the shoulders of the States. Moreover, the borrowing limit of States, as per the Fiscal Responsibility and Budget Management Act, should not be built into these loans.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The <\/span><b>Corporate Social Responsibility Fund could be remitted to the Chief Minister\u2019s Relief Fund<\/b><span style=\"font-weight: 400;\"> in order to augment disaster management resources.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">These are some urgent necessary measures that are to be taken for pumping oxygen to fiscal federalism in India.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Source: The Hindu\u00a0 Relevance: This article focuses upon the aspects of Fiscal federalism in India. Synopsis: A special GST rate could be levied by using the power under Article 279A. This would enable the States to raise more resources during the pandemic. Background: India has a federation with a strong centralizing policy. Nonetheless, India maintained&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/oxygen-for-fiscal-federalism\/\">Continue reading <span class=\"screen-reader-text\">Oxygen for fiscal federalism<\/span><\/a><\/p>\n","protected":false},"author":10322,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[6617,9586,216,5465],"class_list":["post-122073","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-census","tag-fiscal-federalism","tag-gs-paper-3","tag-migration","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704747091},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/122073","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10322"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=122073"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/122073\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=122073"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=122073"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=122073"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}