Why Centre is left with little fiscal cushion to deal with Covid pandemic

When emerging from this crisis, the govt must consider a fresh approach to reviving growth, revisiting the Centre-state fiscal balance, and devising a re-imagined GST 2.0, writes T N Ninan

There are several well-known reasons for the fiscal mess that sits on the central government’s plate, but let’s start with one that is not often discussed: The greater share of revenue that has gone to states. Back in 2013-14, the states got 28 per cent of the Centre’s gross tax revenue. By 2017-18, this share had gone up to 35 per cent. Since then, the Centre has found various ways of clawing back some of the lost ground; last year, the states’ share was 31 per cent.
 
Central transfers as a share of the states’ own revenue have climbed