Budget squeezed under resource transfer to the states

                In an unusual but expected development, the centre’s total budget size has decreased for 2015 -16 compared to the last year. The annual budget of the central government has lost it sheen due to the recommendations of the 14th Finance Commission. Total expenditure of the government decreases to Rs 17.7 lakh crore compared to nearly 17.94 lakh crore in the revised estimates.

The extraordinary situation of government’s expenditure or budget size shrinking compared to the previous year is happened as the 14th FC has recommended that the centre should transfer 42 percent of it tax resources to the states. Altogether, the states now get 62% of taxes in collected in India. This tilt in centre state financial relationship is occurring from 2015 -16 fiscal onwards.

In the context of increased money to the states the new budget has either decreased expenditure on entrain heads. At the same time, the FM has announced that the centre will continue its lead expenditure role in rural development, education, and infrastructure.

To compensate the revenue loss, the FM has made many micro measures including increase in disinvestment and expenditure control measures. At the same time, flagship projects like MGNREGA gets higher allocation. But many plan schemes under agriculture and rural development has not found any allocation in the budget. These programmes will be now expected to figure under the state’s budget.