Topic: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.
2. Account for the dire need for measures on part of the Central government to consolidate fiscal federalism in the aftermath of pandemic and implementation of the GST regime in India. (250 words)
Reference: The Hindu
Why the question:
States are facing financial constraints in the backdrop of lockdown and consequent dwindling revenue collection. The situation also highlights the issues of fiscal federalism in India.
Key Demand of the question:
Give reasons for the dire need for measures on part of the Central government to consolidate fiscal federalism in the aftermath of pandemic and implementation of the GST regime in India.
Directive:
Account – Weigh up to what extent something is true. Persuade the reader of your argument by citing relevant research but also remember to point out any flaws and counter- arguments as well. Conclude by stating clearly how far you are in agreement with the original proposition.
Structure of the answer:
Introduction:
Start with the present context of the question.
Body:
Discuss in detail the issues facing fiscal federalism in India. First, the Goods and Services Tax (GST) law assured States a 14% increase in their annual revenue for five years (up to July 1, 2020).
Second, last year, the Union government increased the borrowing ceiling of the States from 3% to 5% for FY 2020-21. But the conditions are attached to 1.5% out of this 2% increase of ceiling. States will have to bear the burden of welfare and relief measures during the pandemic. These conditions go against the principle of cooperative federalism.
The 15th Finance Commission had recommended Rs. 2,412 crore as a sector-specific grant and Rs. 1,100 crore as a State-specific grant for Kerala. But this amount has not been released.
The expenditure rules attached to the Disaster Management Fund are unviable.
Suggest what needs to be done.
Conclusion:
Conclude that urgent necessary measures are must to be taken for pumping oxygen to fiscal federalism in India.
