Modi Accepts Finance Commission's Record Hike In States' Share

NEW DELHI: With its first full budget due this weekend, the Narendra Modi-led government on Tuesday accepted the recommendations of the 14th Finance Commission for a record increase of 10 per cent in the states' share of the divisible pool of central taxes, despite negative implications for the fiscal deficit.

In a letter to all chief ministers, Modi said: "We have wholeheartedly accepted the recommendations of the 14th Finance Commission, although it puts a tremendous strain on the Centre's finances."

"The 14th Finance Commission has recommended a record increase of 10 per cent in the devolution of the divisible pool of resources to states," he said, according to a release from the prime minister's office.

As per the increased devolution suggested in the report of the 14th Finance Commission, the states will get Rs 348,000 crore in 2014-15 and Rs 526,000 crore in 2015-16.

"There is a shift from scheme- and grant-based support from the central government to a devolution-based support. Hence, the devolution of 42 per cent of divisible resources," the PMO said.

"The total devolution to states in 2015-16 will be significantly higher than in 2014-15. This naturally leaves far less money with the central government," it added.
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