Page 332 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Indian Economic Policy

Notes • The problem of Centre-State financial relations has thus been a part of the general and more
important problem of Centre-State relations. The West Bengal Memorandum would allow The
Centre to perform only three or four functions and leave the rest of the functions to the States.
• The States’ complaint about inadequate financial resources and their demand for large taxation
powers would sound more reasonable if the States had fully exploited the resources they command.
• The Finance Minister’s estimate of subsidies is focused on budget-based subsidies. The estimation
of budgetary subsidies are computed as excess of the cost of providing a service over the
recoveries from the service.
• Food subsidy in India comprises of three components : (i) subsidies to farmers through support
prices, (ii) subsidies to consumers through public distribution system, and (iii) subsidies to the
Food Corporation of India (FCI) in its purchase and maintenance of buffer stocks.
• Since the FCI continues to purchase foodgrains without any limit, this has resulted in the creation
of buffer stocks in FCI godowns far in excess of the prescribed minimum norms. Food stock
reached a peak of 63 million tonnes in July 2002, more than 2.5 times the norm of 24 million
tonnes.
• It is now really over a decade that a comprehensive paper on subsidies was presented by National
Institute of Public Finance and Policy (NIPFP) in 1997. The situation has changed drastically
since then and there is a need to re-examine the issue.
• The only policy option available with the Government is to present a comprehensive paper on
all subsidies Central as well as state levels, both implicit and explicit. It is quite possible that a
national debate on the question of subsidies may result in throwing up a consensus on some
short-term and some long-term options to reduce the mounting burden of subsidies.
25.3 Key-Words

1. Allocation : The act of allocating or the state of being allocated
2. Jurisdiction : Jurisdiction (from the Latin ius, iuris meaning "law" and dicere meaning "to speak")
is the practical authority granted to a formally constituted legal body or to a political
leader to deal with and make pronouncements on legal matters and, by implication,
to administer justice within a defined area of responsibility. The term is also used
to denote the geographical area or subject-matter to which such authority applies.
Jurisdiction draws its substance from public international law, conflict of laws,
constitutional law and the powers of the executive and legislative branches of
government to allocate resources to best serve the needs of its native society.
Answers: Self-Assessment
1. (i)(c) (ii)(d) (iii)(a) (iv)(b)
25.4 Review Questions

1. Discuss the distribution and allocation of central revenue.
2. Explain the role of finance commission.
3. What are the responsibilities and resources of the centre and of the states?
25.5 Further Readings

1. The Indian Economy; S.K. Ray; Prentic, Hall of India Private Limited
New Delhi - 110001.
2. Indian Economy; Gaurav Datt and Aswani Mahajan; S. Chand and Company
LTD. Ram Nagar, New Delhi-110055.

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