Impact of planning on centre -state financial relation in India

Intergovernmental financial relations seem to be one of the complex and least understood of all problems facing India today. The present study has been prompted by a flood of opinions expressed by politicians and economists in recent years that the federal character of the Indian. Constitution has been lost in the morass of planning and development. It is no exaggeration to state that increased centralization is mainly due to changing financial interrelationships between the centre and the states; financial relations between the general government and units inevitably change with planned development.

So far no study has yet been made of the state budgets, in an unbiased manner, to see the effect of plan ning, whether it has really led to increasing dependence of the states on the centre. So far politicians at the state levels claim that greater responsibility has been increasingly shoved on to the shoulders of the states without a concomitant in crease in financial powers, economists have argued that this and has led to increasing dependence of the states on the centre and distortion of the federal features of the Indian political system. These discontented expressions and apprehensions of increasing dependence of states on the centre are not based on any analysis of budgetary data, but are put forward to safeguard the position of the states and their rights.

The study focusses upon the impact of planning on the volume and com position of central assistance. The assistance. recommended by the Finance Commissions and the Planning Commissions is analysed to determine if the trend has been towards increased centralization. The budgets of the states are also examined to ascertain the basis for the fear of increased dependence of states on the centre, and to study the influence of planning on the revenue and expenditure patterns of states. The problems that states have to face with increasing central assistance are also highlighted.