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The Shifting Political Economy of Centrally Sponsored Schemes -Pranay Kotasthane

-TheWire.in

Action now shifts to the states which will have the first real opportunity to react to a new, and still evolving fiscal landscape

One of the most dynamic features over the last three budgets has been the apparent consolidation of centrally sponsored schemes (CSS) — schemes like MGNREGA and National Health Mission, which are formulated by the Union government on subjects from the State List to encourage states to prioritise on specific areas. Continuing this trend, the latest Union budget further consolidated the number of CSS to 30.

The changes in CSS started last financial year with a higher tax devolution recommended by the Fourteenth Finance Commission (FFC). This higher tax devolution without a corresponding increase in revenue receipts meant that the Union government restructured its approach of running a plethora of central schemes under state plans. Specifically, the Union government decreased its own support for some of them in last year’s budget. In a few cases, the government discontinued some centrally sponsored schemes altogether, bringing down the total number of CSS from 147 to 66.

On the other hand, the response of the states to the question of CSS restructuring was two-fold. Initially, states had submitted to the FFC that proliferation of CSS impinges upon their fiscal autonomy as they do not have any say in design of these schemes and face many restrictions in their implementation (Finance Commission 2015: 88). At the same time, states also clearly demonstrated an endowment effect — they continued to see CSS an important source of money that they weren’t willing to give up.

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