How over-dependence on central funds is driving states to fiscal peril

The RBI report on state finances shows that states' own revenues are faltering, while its social spending is rising squarely on account of centrally-sponsored schemes

The Reserve Bank of India’s latest study on the financial situation of Indian states has underlined several key pain points that they face, such as their weakness in servicing debt, the falling quality of their spending, and the load of specific initiatives such as farm income support and power sector bailout on finances. 

A closer look at long-term data trends suggests states’ ability to garner their own revenues has been seriously curtailed in recent years. While their revenues from sales tax are dwindling, the Centre is sharing fewer resources with them by levying more and more taxes on which they