Planning States

For this an adequate level of social and economic infrastructure and cost effective provision of public services like education, health, agricultural extension and rural development are critical. This is in addition to the prime responsibility of governments to providing an administrative and legal framework for the market to operate efficiently. The overwhelming importance of the state governments in these areas can hardly be over-stated. Collectively, the states incur more than 70 per cent of total developmental expenditure. This is concentrated in the areas of infrastructure (about 87 per cent), social service (about 85 per cent), and agricultural development (about 80 per cent).

 

The change in the economic regime will put more expenditure responsibilities on the states. With the Centre still trying to restore its fiscal balance, increasing the plan transfers to states is not really an option. It will only shift deficits from one level of government to the other. In addition, the Commission has also to incorporate the newly-formed third tier of the federal system