Understanding Fiscal Support and Policy Flexibility in Indian States

fiscal support and policy flexibility in Indian States

States in India are increasingly emphasizing the urgent need for enhanced fiscal support and policy flexibility to tackle their unique developmental challenges. With demands ranging from higher allocations for capital expenditure and disaster management to tailored financial packages for economically weaker regions, the focus is on fostering sustainable and inclusive growth.

Moreover, states are advocating for reforms in Centrally Sponsored Schemes (CSS) and greater autonomy in utilizing funds to cater to their specific needs, reflecting the evolving dynamics of federalism in the country.

1. Higher Capital Expenditure

Many states are calling for increased allocations under the 50-year interest-free loan scheme, particularly for capital-intensive projects. States like Andhra Pradesh and Kerala emphasize the importance of utilizing these funds to build essential infrastructure, including bridges, highways, and public transport systems, which are vital for economic growth and job creation.

2. Disaster Management Funds

States prone to natural disasters, such as Himachal Pradesh and West Bengal, are requesting additional funding for disaster mitigation. Himachal Pradesh, frequently affected by floods and landslides, seeks financial assistance to enhance resilient infrastructure and improve early warning systems. West Bengal has also requested increased disaster response funds to manage recurring floods that disrupt livelihoods and cause significant economic losses.

3. Special Financial Packages for Fiscally Weak States

States facing fiscal challenges, such as Punjab and Kerala, are seeking special assistance to manage financial burdens. Punjab has requested tailored packages for border-sharing states to stimulate industrial development, similar to efforts in Himachal Pradesh and Jammu & Kashmir. Kerala, dealing with high debt, is calling for special allocations to stabilize its economy and fund welfare programs.

4. Higher borrowing limits

Karnataka and Telangana have requested increased borrowing limits to finance essential development projects. Karnataka aims to use additional funds to complete stalled initiatives in education and healthcare, while Telangana emphasizes the need for more borrowing flexibility to implement flagship schemes without financial constraints.

5. Centrally Sponsored Schemes (CSS)

States such as Maharashtra are advocating for changes in the cost-sharing pattern of CSS. Many states propose a 50:50 sharing ratio between the Centre and the states, arguing that the current burden limits their capacity to implement critical programs effectively. Maharashtra also demands flexibility in implementing CSS, allowing states to adapt schemes like Jal Jeevan Mission to their specific needs.

6. Additional Road and Rail Projects

States like Andhra Pradesh and Himachal Pradesh are demanding more funding for rail and road infrastructure. Andhra Pradesh stresses the necessity of funds to connect remote regions through highways and railways, enhancing access and promoting trade. Himachal Pradesh seeks resources to develop rail connectivity in hilly terrains, which would boost tourism and economic activity.

7. Anganwadi and ASHA Workers’ Payments

Karnataka and West Bengal have requested increased allocations to enhance payments for Anganwadi and ASHA workers, who play a crucial role in rural healthcare and nutrition programs. Improving their working conditions is vital for motivating these workers, especially in underdeveloped areas.

8. Water Supply and Storage Facilities

States are demanding funds for effective water supply management. Maharashtra has requested allocations under the Jal Jeevan Mission to build storage tanks and ensure adequate water supply to drought-affected regions, highlighting ongoing challenges related to water scarcity in both rural and urban areas.

9. State-Specific Demands

• Maharashtra: Additional funds for schemes like Mukhyamantri Majhi Ladki Bahini Yojana to support women's empowerment.
• Andhra Pradesh: Financial support for river interlinking projects to tackle regional inequalities.
• Himachal Pradesh: Funds for disaster-resilient rail connectivity to reduce isolation during emergencies.
• Telangana: Implementation of the Andhra Pradesh Reorganization Act for resource allocation.
• Punjab: Incentives for industries in border-sharing regions to boost employment opportunities.

10. Release of Pending Dues

States like West Bengal emphasize the importance of releasing pending financial dues for smooth fiscal functioning. Funds owed under GST compensation and other schemes can significantly aid states in managing their budgets effectively.

11. Focus on Sustainability

Kerala's Finance Minister has called for policies that balance fiscal consolidation with sustainable growth. States require the flexibility to invest in environmental protection measures, renewable energy projects, and climate-resilient infrastructure to address global challenges like climate change.

12. Greater Autonomy in Financial Management

Telangana’s Deputy Chief Minister argues for states to have the freedom to utilize funds from CSS without stringent restrictions. This autonomy would allow states to tackle their unique developmental challenges while ensuring effective scheme implementation.

Frequently Asked Questions (FAQs)

Q1. What is the significance of fiscal support for Indian states?
Answer: Fiscal support is crucial for Indian states as it helps them manage development challenges, invest in infrastructure, and implement welfare programs effectively.

Q2. How do states propose to utilize increased capital expenditure?
Answer: States aim to use increased capital expenditure for building essential infrastructure like roads, bridges, and public transport systems to boost economic growth.

Q3. What challenges do states face regarding disaster management?
Answer: States prone to natural disasters often lack adequate funding for disaster mitigation, impacting their ability to build resilient infrastructure and respond effectively.

Q4. Why do states seek changes in Centrally Sponsored Schemes?
Answer: States advocate for changes in CSS cost-sharing to reduce their financial burden and gain flexibility in implementing programs tailored to local needs.