Page 340 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Indian Economic Policy

Notes (ii) The General Category States that attained a zero revenue deficit or a revenue surplus in
2007-08 should achieve a fiscal deficit of 3 per cent of Gross State Domestic Product (GDSP)
by 2011-12 and maintain such thereafter. Other general category states need to achieve 3
per cent fiscal deficit by 2013-14.
(iii) All special category states with base fiscal deficit of less than 3 per cent of GSDP in 2007-
08 could incur a fiscal deficit of 3 per cent in 2011-12 and maintain it thereafter. Manipur,
Nagaland, Sikkim and Uttarakhand to reduce their fiscal deficit to 3 per cent of GSDP by
2013-14.
(iv) Jammu & Kashmir and Mizoram should limit their fiscal deficit to 3 per cent of GSDP by
2014-15.
• States should amend/enact FRBM Acts to build in the fiscal reform path worked out. State-
specific grants recommended for a state should be released upon compliance.
• Independent review/ monitoring mechanism under the FRBM Acts should be set up by states.
• Borrowing limits for states to be worked out by Ministry of Finance using the fiscal reform
path, thus acting as an enforcement mechanism for fiscal correction by states.
• Loans from Government of India to states and administered by ministries/department other
than Ministry of Finance, outstanding as at the end of 2009-10, to be written off, subject to
conditions prescribed.
Assessment of the Thirteenth Finance Commission Report

Vertical Devolution : Increase in the over-all share of the States from Central revenues
Thirteenth Finance Commission recommended that the share of States in net proceeds of shareable
Central taxes shall be 32 percent every year for the period of the award. It has also recommended for
greater grants-in-aid to states. In all States will get 136 percent higher amount in comparison with
Twelfth Finance Commission. This has been due to increase in the expected revenue of the Centre
and secondly due to increase in the share of states as recommended by Thirteenth Finance Commission.
In comparison to the indicative ceiling of 38 percent by Twelfth Finance Commission, Thirteenth
Finance Commission recommended for indicative ceiling at 39.5 percent of gross revenue receipts of
the centre as overall transfers to states on revenue account.
Therefore one may conclude that with regard to vertical devolution Thirteenth Finance Commission
has done better by granting more revenue transfer to the states.
Table 1 : Share of States in Taxes in 11 , 12 and 13 Finance Commission
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th
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11 Finance 12 Finance 13 Finance
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States Commission Commission Commission
Andhra Pradesh 7.701 7.356 6.948
Arunachal Pradesh 0.244 0.288 0.328
Assam 3.285 3.235 3.634
Bihar 14.598 11.028 10.934
Chhattisgarh 0.000 2.654 2.474
Goa 0.206 0.259 0.266
Gujarat 2.821 3.569 3.046
Haryana 0.944 1.075 1.050
Himachal Pradesh 0.683 0.522 0.782
Jammu & Kashmir 1.290 1.297 1.394
Jharkhand 0.000 3.361 2.806
Karnataka 4.930 4.459 4.335

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