States given more flexibility

Hyderabad: After increasing of grants to 42 per cent, the Centre is likely to quash the centrally-sponsored schemes. However, the Centre will continue poverty elimination, Mahatma Gandhi National Rural Employment Guarantee program, education, health, rural development, agriculture and a few other related schemes.

After the new process of devolution of funds, states will not get funds under plan grants and only get non-plan grants.

The 14th Finance Commission has estimated the funds to be given to the AP state in each year in the next five years according to the advanced estimates of divisible amount. But the amount may increase or decrease depending on the central government’s revenue.

The 14th Finance Commission has also changed the rules of Fiscal Responsibility and Budget Management Act. State governments have been given some flexibility. According to the Act, total borrowings of a state in a year should not cross 3 per cent of the Gross State Domestic Product (GSDP).

As per the new rules, if a state borrows 3.15 per cent in a year, it can only borrow 2.85 per cent the next year. Similarly, if it borrows 2.75 per cent of its GSDP in a year, it can borrow 3.25 per cent the next.

The 14th Finance Commission has allotted a state calamity relief fund of Rs 2429 crore. Earlier the central government’s share was 75 per cent and state government’s was 25per cent. Now the state’s share has been reduced to 10 per cent and the Centre’s share is increased to 90 per cent.

The total divisible amount to the state has increased by around two and half times.  The reason for increasing the total divisible amount is due to introduction of GST from 2016. In the 13th Finance Commission period, AP’s share in the total divisible amount was 4.14 per cent and in the 14th Finance Commission’s period it has been increased to 4.30 per cent.