Rationalisation of Centrally Sponsored and Central Sector Schemes
The Union Ministry of Finance (MoF) has initiated a review of centrally sponsored schemes (CSS) and central sector schemes to merge overlapping schemes and enhance implementation efficiency.
Current Scheme Overview
- The government operates 54 CSS and approximately 260 central sector schemes.
- The large number of schemes is believed to affect outcomes negatively, necessitating periodic reviews.
Criticism and Financial Implications
- The rural employment guarantee programme under the Viksit Bharat — Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025, imposes a 40% expenditure burden on states.
- Centrally sponsored schemes (CSS) reduce fiscal freedom for states, affecting their ability to spend on preferred programs.
- The Reserve Bank of India's December 2024 study noted that numerous central government schemes diminish state government spending flexibility, undermining cooperative fiscal federalism.
Necessity for Scheme Rationalisation
- Rationalizing CSS can improve fiscal space and expenditure efficiency at the Union and state levels.
- States are at different development levels with diverse needs, suggesting that state governments should design and manage developmental and social-sector schemes.
Broader Policy Considerations
- Debate over reallocating fiscal resources for faster growth and development is needed.
- State governments face financial challenges, including high debt levels and populist schemes leading to unsustainable fiscal positions.
- Despite these challenges, state empowerment should not be curtailed; instead, hard fiscal rules and transparent accounting are necessary.
