Changing Landscape of Intergovernmental Fiscal Transfers, an Impact Assessment of Social Sector Priorities of Meghalaya and West Bengal

Abstract

The system of intergovernmental fiscal transfers in India has undergone a considerable change following the implementation of the recommendations of the Fourteenth Finance Commission (FFC), the elimination of the distinction between plan and non-plan expenditures with the abolition of the Planning Commission and the rationalisation of the centrally sponsored schemes as recommended by the Subgroup of Chief Ministers constituted by NITI Aayog. The net gain to states consequent upon the changed landscape of fiscal transfers and also the impact of these changes on state-specific fiscal priorities, more especially towards social sector is supposed to differ in magnitude. The purpose of this paper is to take a stock of the changes in the system of intergovernmental fiscal transfers consequent upon recent developments and to quantify the impact of the changed fiscal transfers on the social sector priorities of Meghalaya and West Bengal. The analysis indicates that there has not been any significant impact of changed composition of Central transfers on the relative fiscal priorities of Meghalaya and West Bengal towards social sector, rather an upward tendency is observed in these expenditures. While a positive net fiscal space is found for West Bengal during 2015-16 and 2016-17, for Meghalaya, the positive net fiscal space is observed only during 2015-16.

Key Words: Fiscal Transfers, Fiscal Space, Social Sector, Meghalaya, West Bengal.