Abstract

The aim of federal transfers is to bring regional economic balance and provide equal social services to all irrespective of their place of residence as it is their constitutional right. In the era of globalization the existence of uniformity in all respects has become must for all over the nation irrespective of residing place. Due to economic planning the functions of state governments have increased considerably and this also increased the sphere of economic and social welfare administration. The existence of non-correspondence of resource and expenditures between centre and states is common to all federations. Increasing socio-economic functions which are expensive and expanding in nature has increased the responsibilities of state governments. The problem of increasing expenditure aggrieves due to disparity in the level of development of various states caused by man made efforts to increase revenue resources and differences in the endowment of resources given by the nature or natural resources. These situations bring the centre and states and different states in the problem of non-correspondence in a federation giving birth to Vertical Imbalances and Horizontal imbalances. The study is a normative one and therefore adopts finance commission data on devolution. This constraints the ability of the states to raise revenues and at the same time it increases their expenditures on socio-economic infrastructure. The transfer of resources through FC (Finance Commission) in form of Tax shares and Grants-in-Aid (henceforth GIA) has played a very crucial role in development of the states. UP the most populous state having nearly 20 crores people has received Rs 3235.1cr during IXth FC, Rs.2632.24cr during Xth FC, Rs. 4007.74cr. during XIth FC, Rs. 21694.12crores during XIIth FC and Rs.30805.9crores during XIIIth FC. These figures show increasing trend but in per capita terms it increased in the period of XIIth FC and XIIIth FC. GIA transfers as percent of GSDP increased sharply during XIIth FC to 9.4% but it decreased during XIIIth FC to7.5%. The paper with secondary data shows the pattern of devolution.It is based on normative approach of analysis.

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