{"id":199713,"date":"2022-08-11T19:03:08","date_gmt":"2022-08-11T13:33:08","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=199713"},"modified":"2022-08-11T19:03:08","modified_gmt":"2022-08-11T13:33:08","slug":"fair-share","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/fair-share\/","title":{"rendered":"Fair share"},"content":{"rendered":"\n

Source<\/strong>: The post is based on an article \u201cFair Share\u201d<\/strong> published in the Business Standard<\/strong> on 11th<\/sup> August 2022.<\/p>\n

Syllabus: <\/strong>GS 2 Issues and Challenges Pertaining to the Federal Structure<\/p>\n

Relevance: <\/strong>Fiscal Federalism<\/p>\n

News: <\/strong>At a recent meeting of the governing council of the NITI Aayog, the state governments indicated that their resources to fund spending were dwindling.<\/p>\n

What are the causes of these tensions between the Union government and many state governments?<\/strong><\/h5>\n

Some of this has been caused by the transition to Goods and Services Tax (GST). It has reduced the space available to state governments to raise their own revenue.<\/p>\n

The GST compensation payments to the states, which guaranteed increases in state revenues under the GST, have been ended.<\/p>\n

The states argue that the Union government is taking too large a share of the tax revenues<\/strong>. As per some reports, the states\u2019 share in taxes collected by the Union government has been between 29-32% since the pandemic hit in 2020-21. This is about 10 percentage points lower than the recommendations that were made by the Fifteenth Finance Commission (FFC)<\/strong>.<\/p>\n

Further, the Union government is excessively resorting to various kinds of cess<\/strong> and surcharge<\/strong> in the tax mix. For example, the proportion of revenue raised from cess and surcharges has risen from about 6% in 2014 to almost 25% of the tax collection now. Unlike regular taxes<\/strong>, these are not part of the divisible pool<\/strong>. Therefore, the Union government does not have to share these with the states.<\/p>\n

What are the arguments in favor of providing more resources to the state governments?<\/strong><\/h5>\n

The fact is that the state’s administrative machinery is on the front line of delivering growth and development.<\/p>\n

It is the main touchpoint between the citizen and the government.<\/p>\n

Underfunded states lead to poor public provision <\/strong>of services, with deleterious effects on both citizen welfare and the growth potential of the economy.<\/p>\n

The centralization of the fiscal and spending power through various measures such as cess or centrally sponsored schemes could affect the delivery of quality services to citizens.<\/p>\n

What are the arguments against providing more resources to the state governments?<\/strong><\/h5>\n

The Centre also has spending commitments and needs resources to finance national security needs and to run welfare programs.<\/p>\n

The State governments are often alleged of inefficient and ineffective utilization of funds. Further, the quality of spending is also debated.<\/p>\n

What should be done?<\/b><\/span><\/h5>\n

In terms of spending, <\/span>reforms<\/strong> are needed at both levels of the government. For Example, the <\/span>division of resources<\/strong> should be done more transparently.<\/span><\/p>\n

The Central government shouldn\u2019t excessively resort to imposition<\/strong> of cess<\/strong> and surcharge,<\/strong> as it distorts the tax system and creates inefficiencies. This could increase resentment among states and lead to greater friction between the Centre and the states.<\/p>\n

The Union and state governments work together to take the development process forward.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source: The post is based on an article \u201cFair Share\u201d published in the Business Standard on 11th August 2022. Syllabus: GS 2 Issues and Challenges Pertaining to the Federal Structure Relevance: Fiscal Federalism News: At a recent meeting of the governing council of the NITI Aayog, the state governments indicated that their resources to fund… Continue reading Fair share<\/span><\/a><\/p>\n","protected":false},"author":10343,"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":[10503,212],"class_list":["post-199713","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-business-standard","tag-gs-paper-2","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704835135},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/199713","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\/10343"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=199713"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/199713\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=199713"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=199713"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=199713"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}