Finance Commission report: States' borrowing window, health spending & more

 States will receive Rs 10.33 trillion in grants

States to get Rs 10.33 trillion in grants
States will receive Rs 10.33 trillion in grants. This will make aggregate transfers to the states at Rs 52.53 trillion, roughly at 50 per cent of the total divisible pool in the next five years

Devolution to states kept intact
In order to maintain predictability and stability of resources during the pandemic, the tax devolution to states was retained at 41 per cent of the divisible tax pool. This will amount to Rs 42.2 trillion for the next five years. However, the Centre imposed agriculture infra cess on certain items, including petrol, diesel, gold, and some imported agricultural products, while reducing tax rates to make it neutral

Concerns of southern states addressed
Commission was sensitive to the concerns raised by southern states overtaking 2011 census into consideration. As such, it gave 12.5 per cent weightage to demographic performance in the devolution. The population has been given 15 per cent weightage

Fiscal consolidation road map of 4% by FY26
The Finance Commission recommended that the Centre brings down its fiscal deficit to 4 per cent of GDP by 2025-26 against 6.8 per cent in FY22. The government has accepted the recommendation with an escape clause of 0.5 percentage points for the terminal year. For states, it recommended a fiscal deficit at 4 per cent of GSDP, 3.5 per cent in the following year and 3 per cent for the next three years

Local governments to get Rs 4.4 trillion
As much as 60 per cent of the grants to rural local bodies should be tied to support and strengthen the delivery of two categories of basic services (a) sanitation and maintenance of open-defecation free status — management and treatment of household waste, and human excreta and faecal sludge management in particular; and (b) drinking water, rainwater harvesting and water recycling

Rs 31,755 crore recommended as a grant to health services
15th FC recommended that health spending by states should be increased to more than 8 per cent of their budget by 2022. It also recommended that public health expenditure of the Centre and states should be increased in a progressive manner to reach 2.5 per cent of GDP by 2025 as sought by the national health policy

States’ borrowing window expands
Extra annual borrowing space for the states, of the magnitude of 0.50 per cent of their GSDP for each of the years 2021-22 to 2024-25, based on certain performance criteria in the power sector

Read More: Budget 2021