Pivotal Role of the Central Grants
Jose Jacob
Dr. Jose Jacob, Department of Public Policy, Research Institute, Chirakara Palace, Thiruvananthapuram (Kerala), India.
Manuscript received on 17 October 2024 | First Revised Manuscript received on 05 November 2024 | Second Revised Manuscript received on 18 April 2025 | Manuscript Accepted on 15 May 2025 | Manuscript published on 30 May 2025 | PP: 108-113 | Volume-5 Issue-1, May 2025 | Retrieval Number: 100.1/ijef.A262305010525 | DOI: 10.54105/ijef.A2623.05010525
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© The Authors. Published by Lattice Science Publication (LSP). This is an open-access article under the CC-BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)
Abstract: In the Indian federal system, the Central Finance Commission is appointed every five years under Article 280 to make recommendations on the distribution of central taxes among the states. Besides, the central government provides grants for various needs to the states under Article 275. To address challenges such as evident economic imbalances, distorted resource distribution, natural disasters, epidemics, and adverse global events, the Government of India has established a robust and resilient grant system. Unlike the central share of taxes, the central government imposes selected conditions on utilising specific grants. Some states have complained that this affects their fiscal autonomy. However, in many states, by sacrificing the basic tenets of public resource utilisation, stupendous amounts of loans are mobilised in the name of capital investment and diverted to financial extravagance for their political gain, creating fiscal stress in the economy and a high burden for the taxpayers in the years to come. In this context, the role of central grants in the financial status and economy of various states is analysed with the help of simple statistical techniques using budget data. This system is designed to deliver assistance rapidly during crises, supported by a flexible framework that helps states navigate their crisis phases efficiently. At the same time, federal grants are beneficial for achieving sustainable development goals. They encourage states to prioritise projects that emphasise environmental and social considerations and maximise both creative and productive investments. The advantages of grants from the central government extend beyond mere financial assistance; they also strengthen the country’s framework and improve public welfare programs that promote inclusive development for all. Further, these grants empower states and help them fully leverage the benefits of a cooperative federal structure. This article analyses the goals of central grants, focusing on practicality and effectiveness..
Keywords: Central Finance Commission, Article 268 to 293, Central Grants, Special Assistance to States.
Scope of the Article: Finance