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Uttar Pradesh Chief Minister Akhilesh Yadav's pet projects are likely to get a fresh lease of life, thanks to higher devolution of taxes from 32 per cent to 42 per cent to states by the Centre.
Currently, the state government is financing several projects out of its own resources such as Lucknow Metro Rail and Agra-Lucknow Expressway. Besides, there are other populist and social sector schemes such as Samajwadi Pension Scheme and minority-targetted welfare programmes, which are run by the state government.
Although in absolute terms UP stands to gain, in the higher share of tax revenue, the state stands to lose in terms of its share in total devolution.
UP's share in the total divisible taxes kitty was around 20 per cent, which has now come down to 18 per cent, since the Finance Commission has now considered other parameters such as forest cover to compute the respective state's share apart from population amongst others.
During 2013-14, UP had received about Rs 85,572 crore from the Centre on account of its taxes revenue share (Rs 62,777 crore), grants (Rs 22,405 crore) and loans/advances (Rs 390 crore). Besides, UP's own tax and non-tax revenue during 2013-14 was Rs 66,582 crore and Rs 16,449 crore, respectively.
Over the past several years, UP has been performing well so far as managing finances is concerned.
While it has managed to keep the fiscal deficit below 3 per cent, the public debt has come down every year and is currently pegged at 27.5 per cent of the gross state domestic product (GSDP) - estimated at Rs 8,55,135 crore during 2013-14.
As the devolution of more funds to states comes with decreased spending by the Centre on some centrally sponsored schemes, UP, like any other competing state, would have to judiciously use additional funds coming from the finance commission.
As these funds are largely at the discretion of the state, the government would be hard-pressed for its optimum utilisation.
The grants and funds coming from the erstwhile Planning Commission used to be project and sector specific allocations with tough monitoring by it.
