- REVENUE DEFICIT GRANTS TAPER, BUT MANY STATES YET TO BRIDGE GAP
WHILE THE CENTRE is soon expected to set up the 16th Finance Commission (FC) that will inter alia suggest the level of grants to promote national goals during FY27-FY31,an FE analysis of the first four years of the 15th FC's six-year award period showed that states have lost ₹1.3 trillion or roughly 15% of the combined central government grants.
This was mainly due to their inability to meet the eligibility conditions for the incentives. Half of the under-utilisation can be attributed to urban and rural local bodies failing to comply with the conditions.
To put this in perspective, the loss of grants in these four years is equivalent to the size of the 50-year, interest-free capital expenditure loans scheme extended by the Centre to states in FY24 (Budget Estimate).
FC grants fall under five broad categories: those meant to address stubborn revenue deficits in some states, funds for local governments; disaster management; sector-specific and state-specific.
Except for revenue deficit grants, the actual flow of funds on other heads of grants remained below the recommended amount during the award periods of earlier commissions as well. This was mainly due to challenges faced in the release of conditional grants. Grants for local bodies, revenue deficit grants and disaster management grants constitute 83% of all grants in the 15th FC period.
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