The good BJP chokehold on state funds

Following the Planning Fee’s dissolution, the Finance Fee’s allocation was elevated from 34 per cent to 41 per cent. Nevertheless, Professor Kumar argues that the precise allocation stays solely round 34–35 per cent.

This discrepancy arises because of the rising use of cess and surcharges, that are collected by the Centre however not included within the divisible pool of funds shared with the states.

Beforehand, company tax was not included within the allocation to states. A constitutional modification made throughout Atal Bihari Vajpayee’s tenure in 2000 formalised the exclusion of cess and surcharge from the divisible pool. Since 2015–16, beneath the Narendra Modi authorities, cess and surcharge collections have steadily elevated, additional lowering the monetary share of states.

These pressures have an effect on not simply Opposition-ruled states but in addition BJP-led states. Not too long ago, a Maharashtra cupboard minister acknowledged that the state authorities needed to dip into the workers’ provident fund and gratuity reserves to pay salaries. Although the assertion was later retracted, it underscored the monetary misery states are dealing with.

Nonetheless, whereas clearly all states battle beneath the present Centre–state fiscal association, non-BJP-ruled states seem to bear the brunt of the pressure.