Central transfers to states down 0.3 percent: RBI

Despite higher devolution of taxes as recommended by the Fourteenth Finance Commission, there was a decline in central transfers to states by 0.3 percent of GDP in 2015-16, said a report of Reserve Bank of India released on Thursday.

"Despite an increase in the share of tax devolution from 32 percent to 42 percent of the divisible pool on the recommendations of the Fourteenth Finance Commission, the central transfers-GDP ratio is budgeted to decline due to the sharp reduction in grants-in-aid," it said.

The report titled "State Finances: A Study of Budgets of 2015-16" further said consolidated state level data reveal that grants-in-aid have reduced by 0.8 percent of GDP from 2014-15 while higher devolution would lead to an increased share in central taxes by 0.5 percent of GDP in 2015-16.

"...the net impact of the changed pattern of funding is a decline of 0.3 percent in central transfer to states from the previous year, with adverse implication for states' spending on social infrastructure," it said.