- Recently, Karnataka approached SC to seek relief against Centre in matters related to release of financial assistance from National Disaster Response Fund (NDRF) for drought management.
- Earlier, Tamilnadu also approached SC for non-disbursal of funds by centre under NDRF to deal with calamities of cyclone Michaung and unprecedented floods.
- Status of State Finance
- States finance only 58 % of their revenue expenditure from their revenue sources.
- Debt-GDP ratio of states stands at 27.5 % (March 2023).
- Reasons for State's dependency on Centre
- GST compensation for states ended in June 2022, and revenue collected under SGST is lower than revenue from taxes subsumed under GST.
- Increased use of cesses and surcharge by Centre which are not shared with states.
- Strained on states finances due to measures like farm loan waivers etc.
- Measures taken to improve State Finance
- Scheme for Special Assistance to States for Capital Expenditure provides 50-year interest-free loans to States.
- 15th Finance Commission recommended performance-based additional borrowing space of 0.50% of State GDP to States in power sector.
- Way Forward
- Foster business-friendly tax administration, to strengthen states revenue collection.
- Revise user charges on electricity, water, and other public services, etc. to increase non-tax revenue.
Constitutional Provisions related to States’ finances
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