Revenue Deficit Grant

Revenue Deficit Grant Meaning

Revenue deficits occur when realized net income is less than expected net income. This happens when the actual income and/or actual expenses do not match the budget income and expenses. This is the opposite of excess income which occurs when the actual net income exceeds the expected amount. Not to be confused with the budget deficit, the revenue deficit measures the difference between the expected and actual income levels. If a company or government is under-revenue, it means that its income is insufficient to cover its basic business. In this case, you can offset the income you need to cover by borrowing or selling your existing assets.

To deal with income shortages, the government can decide to raise taxes or reduce spending. Similarly, companies with low sales can make improvements by reducing variable costs such as material and labour costs. Adjusting fixed costs is more difficult, as most are covered by contracts such as the building rent law. If left uncorrected, revenue shortfalls can affect the creditworthiness of governments and businesses. This is because a persistent deficit can mean that the government is unable to meet its current and future regular obligations. It also means that the government or business must sell or borrow to make up for the shortfall.

Shortages of income endanger many planned governments spending because there is not enough money to cover the costs. Governments that are often under-revenue use savings allocated to other sectors of the economy to cover their spending. A lack of income does not mean that you have lost your income, it simply measures the difference between your predicted and actual income. If a company or government is under-revenue, it means that its revenue is not enough to cover its basic business. Companies can avoid future revenue shortfalls by identifying and implementing cost-cutting measures.

Post Devolution Revenue Deficit Grant Meaning

Under Article 275 of the Constitution, the Center will award the state a post-delegation revenue deficit subsidy. Subsidies are released in monthly instalments (centre’s split tax pool) to fill the post-delegation state revenue account gap, as recommended by the Finance Commission. The 15th Finance Commission has a revenue deficit subsidy after a delegation of about 3 trillion rupees in the five years up to FY2014. The number of states eligible for revenue deficit will be reduced from 17 in 2010, the first year of the award period, to 6 in 2014, the final year. The eligibility of the state receiving this grant and the amount of the grant were determined by the Commission based on the discrepancy between the state’s revenue and expenditure assessments.

It is recommended to offer Andhra Pradesh, Assam, Hariyana, Himachal Pradesh, Karnataka, Kerala, Manipur, Meghalaya, Mizoram, Nagaland, Punjab, Rajasthan, Sikkim, Tamilnadu, Tripla, Uttarakhand and West Bengal in 5 years. With the missing grant. The Treasury followed the recommendations. The Treasury has approved Rupees 9,871 in the second monthly instalment of the Post-Delegation Revenue Deficit (PDRD) from 202122 to 17 provinces. 

These allow the state to bear the costs of development plans implemented with the consent of the Government of India to promote the welfare of the state’s incorporated tribes or to raise the level of control of the incorporated area. The purpose is to do so. Pass management of other territories in the state. Grants should primarily help level out differences in funding between states and coordinate the maintenance and expansion of state governments’ social systems at the federal level.

Post Devolution Meaning

Revenue shortage subsidies after delegation are granted to the state under Article 275 of the Constitution. The subsidy will be released to the state in accordance with the recommendations of the 15th Finance Commission to fill the gap in the state’s revenue account after delegation. The Commission has recommended PDRD grants to 17 states/grants are offered in monthly installments.

State eligibility and grant amounts were determined by the 15th Fiscal Commission based on the gap between state revenue and expenditure estimates after considering decentralization estimates for fiscal year 202122. The 15th Finance Committee recommended the allocation of revenue deficits to 17 provinces in 202122 after the delegation of total authority of 1,18,452 rupees. Of them, 98,710 rupees (83.33 percent) have been announced so far.

Conclusion: 

The Treasury has released a monthly Post-Delegation Revenue Deficit (PDRD) grant of Rs 9,871 to 17 states. This was the 11th installment payment of the PDRD grant awarded to the state. The Treasury said in a statement that subsidies would be released to the state in accordance with the recommendations of the 15th Finance Committee to close the gap in the state’s revenue account after decentralization. The Commission recommends PDRD grants and releases them evenly in 17 states each month. The 15th Finance Committee recommended that 17 states receive revenue deficit grants totalling Rs. 18,000.452 million after delegation in 2021-22. The ministry said that more than 8,000 rupees have been released to eligible countries so far.