Impact of the Recommendations of the 14th FC: Central Transfers and Social Sector Expenditures in the 1st Year
Publication dateNov, 2016
DetailsNIPFP Working paper No. 183
AuthorsMita Choudhury, Ranjan Kumar Mohanty and Jay Dev Dubey
Recent evidence on the impact of the recommendations of the Fourteenth Finance Commission (FFC) suggests that there has been an increase in Central transfers and social sector expenditures in a number of States in 2015-16, the first year of the FFC award period. We argue that the evidence on gains through Central transfers and increases in social sector expenditures is biased upwards because of two factors. First, much of the gains have been measured with respect to a low base year, and secondly, inferences have been drawn based on comparisons between Actuals and Revised Estimates or Revised Estimates and Budget Estimates. Comparing Revised Estimates for the same years for fifteen major States, we find that Central transfers and expenditures on Social Services as per cent of Gross State Domestic Product (GSDP) are likely to fall in a number of States. Besides, in most States, Social Services have received a lower priority than Economic Services in the first year of the FFC award period.