Role of FC in Sustainable Development By Yasmin Gill
Know your educator Yasmin Gill BE (EEE) from UIET, PU in 2014 Qualified for UPSC Mains State Rank 24 in Punjab Civil Services 2015 Follow me on Unacademy https://unacademy.com/user/yashi.gilloi
Discount Code for Plus- 'yashi.gill013 QUESTION OF THE DAY Q- The role of Finance Commissions in sustainable development needs to be complemented by better governance measures in states. Elaborate
plus Discount Code yashi.gill01 ETHICS, INTEGRITY & APTITUDIE Complete Course on Ethics, Integrity & Aptitude Lesson 27 Today, 6:00 PM Yasmin Gill OFF
Role of FC in sustainable development IVEMINT Constitutional status and the ability to suggest far-reaching reforms on financing, allocation and use of funds by three tiers of govemance makes the central t state FCs completely capable to discharge this role However, effective implementation is the responsibility of the three tiers, which is an issue of good governance Education and health expenditure by states play a key role Additional financing is required to meet SDG targets by 2030 Despite increase in education and health spending by some states, there is lack of efficiency in Rajasthan, Uttar Pradesh, Madhya Pradesh and Odisha
Also there was no evidence of poorer states "catching up" with richer states in quality of human capital formation and health-related expenditure SO Crisil report- While Rajasthan, Jharkhand, Uttar Pradesh and Telangana spent most out of their budget on capital expenditure, health and education sectors remained impoverished Good governance + Growth - Key in achieving spending efficiency in education, health and social sectors
Many states may no more be left with sizeable funds Punjab, Rajasthan and Kerala-Debt ratios over 30% Some of these states have experienced declines in grants-in-aid and their own revenues as a percentage of GSDP Revenue deficits and fiscal deficits Takeover of debt of DISCOMs under UDAY and farm loan waivers are also key reasons for high deticits in states Challenge is to achieve long-run sustainability of debt and deficits Consequently, states such as Rajasthan double whammy One they did not have adequate funds to spend Existing expenditure has not been delivering desired outcomes
The role of local govemments often ignored They are closest to ground +Ability to make investment choices based on evidence and consistently monitor outcomes Constitution Bottom up approach in determining resource allocations by mandating state FCs to take into account requirements of local governments and inform the central FC, it rarely happens Local government expenditure as a percentage of total public sector expenditure is only around 7% (24% in Europe, 27% in North America) Terrn of several state FCs repeatedly extended and no coordination between central and state FCs to understand a consolidated account of the reality at the sub-state level FCs need to look within and improve intemal processes for better coordination, making realistic assessment of ground realities and improving outcomes
Over the years, several suggestions... Swaminathan A. Aiyar Central FCs propose substantial rewards for states that are serious about decentralisation, and penalties for those that are not Vijay Kelkar radical changes in fiscal federalism framework Create a consolidated fund for municipalities and panchayats to ensure that revenue allocated by central and state FCs flow directly to it States and the Centre should share an equal percentage of their respective GST collection with the third tier This will lead to growth of economic activities, resident citizens' incomes and consumption
Suggestions also to create market-based mechanisms for financing At present, states are neither rewarded nor penalised for their debt management An index of debt sustainability & fiscal prudence performance indicators for measuring performance can be createcd Fiscally strong govenments -rated to get better rates in auction of bonds Cash surplus state govemments can be allowed to lend to those in deficit at a market-linked rate Market-based mechanisms allowing inter-municipality borrowing and lending Performance measurement on predefined indicators -incentivise productivity and fix accountability of local govemments . FCs need to become agents of change
Gratitude is the best attitude RATE, REVIEWAND RECOMMEND