 (8).png)
3 weeks ago
5
ARTICLE AD BOX
Summary
India's proliferation of centrally sponsored schemes over the decades has left us with an unwieldly maze. Few can be justified by their impact. Here’s how the country can put them to test. Many would need to be either reformed or dropped.
K. Hanumanthaiah, then chief minister of Mysore, made two related complaints at the third meeting of the National Development Council (NDC) in November 1954.
First, that India’s states were finding it difficult to find resources to match their share of expenditure on schemes sponsored by the Centre. Second, the Centre was issuing directives without consulting them. The minutes recorded his protest. Nothing else came of it.
Two years later, Madhya Pradesh said the same thing in different words—that it had no money beyond the plan to match Central assistance. In 1967, an NDC subcommittee was set-up to examine the matter. The complaints have a long memory; the responses, a shorter one.
The idea of centrally sponsored schemes (CSS) has been examined repeatedly for 71 years. The 16th Finance Commission’s (FC) report records that there are now more than 80 CSS, run by more than 20 departments and ministries, with budgets amounting to roughly 1.5% of GDP. This accounts for over half of all transfers from the Centre to the states.
Five schemes (MGNREGA, the Pradhan Mantri Awas Yojana, Jal Jeevan Mission, Samagra Shiksha and the National Health Mission) between them absorb more than half the total CSS outlay. The remaining 75-odd schemes share what is left, many with allocations too small to register as a national programme.
The 16th FC notes that the five-year review mechanism has not led to the closure of any scheme. Goalposts are shifted. Objectives, when achieved, are redrawn. The schemes are renewed.
A reader unfamiliar with the file will assume this is an executive failure of recent vintage. It is not. Article 282, tucked into a chapter titled ‘Miscellaneous Financial Provisions,’ permits both the Union and states to make grants for any public purpose, notwithstanding the question of legislative competence.
It was meant to be a residual provision, the ex-post exception. But it became the main channel for inter-governmental transfers because the erstwhile Planning Commission (PC) saw it could route schemes through Article 282 and bypass the Seventh Schedule altogether. The PC was wound up in 2014; the schemes it spawned were not.
Most of the literature on the subject gets even the etymology wrong. The B.K. Chaturvedi Committee report of 2011 and a sub-group of chief ministers chaired by Shivraj Singh Chouhan in 2015 were exercises in restructuring, not rationalization.
To restructure is to re-arrange. To rationalize is to ask whether the thing should exist at all. The 2015 group reduced the schemes to 30 umbrella heads. But beneath each umbrella, sub-schemes multiplied. An umbrella called Green Revolution has under it the Rashtriya Krishi Vikas Yojana, National Food Security Mission, Horticulture Mission, Oilseeds and Oil Palm Mission, National Project on Soil Health and a dozen others. Counted by sub-schemes and components, the real CSS number is closer to 200.
If one were to design the system afresh on first principles, six rules would do the work.
One: Article 282 should be returned to its residual status as originally conceived. The bulk of programme transfers should pass through Articles 270 and 275. That is, through the FC, untied.
Two: No CSS should exist for items on the state list. If the Centre funds health because it is nationally important, states must be permitted to fund defence on the same logic. The proposition is absurd. So is the reverse.
Three: Items on the Union list should be central sector schemes, with no matching grant. He who decides pays.
Four: Items on the concurrent list may be cost-shared, but the formula must be principled and the design genuinely flexible, not the one-size-fits-all template that has prevailed so far.
Five: A minimum threshold below which no scheme can be a CSS. The Chaturvedi Committee suggested ₹100 crore in annual outlay; an earlier Arvind Varma Committee, ₹300 crore. Adjusted for inflation, the right number today should be about ₹500 crore.
Six: Zero-based budgeting at every FC cycle. No scheme should be renewed by default. The administrative ministry must justify its continuation. Without evidence, the scheme must lapse. Let sunsets be the rule and renewals an exception.
The Seventh Schedule, a colonial inheritance from the Government of India Act of 1935, itself needs a relook. It can yield a fiscal dividend. The 1.5% of GDP currently consumed by CSS, much of it on schemes of doubtful utility, would be freed for capital expenditure on Union list items where the multiplier is uncontested and not dependent on implementation by states.
Hanumanthaiah’s complaint was that the Centre was sponsoring schemes the states could neither afford nor influence. The 16th FC’s complaint, in different language and with better data, is the same. It has again proposed a committee to rationalize CSS.
These schemes have survived four FCs and one PC. When they began, they were meant to be miscellaneous. They have become so in a different sense; many of them can reasonably be described as disorderly, undifferentiated and burdensome.
The author is a public policy professional.
About the Author
Aditya Sinha
Aditya Sinha is an economist and public policy professional, and a Mint contributor writing regularly for the publication since 2020. His work spans Centre-state relations, fiscal federalism, technology policy, and research and development policy in India.<br><br>He previously served as Officer on Special Duty (Research) at the Economic Advisory Council to the Prime Minister, where he contributed to a wide range of high-impact policy initiatives. These included work on fiscal responsibility reforms, school education, industrial policy through the production-linked incentive scheme, judicial reforms, drone regulation, labour law reforms, India's RTAs, bilateral investment treaties, and India's R&D ecosystem among others. He also contributed to the committee on Infrastructure Classification and Financing Framework, and worked on strengthening India's statistical system and early childhood development programmes.<br><br>His peer-reviewed research has appeared in several journals, including the Journal of the Asia Pacific Economy.<br><br>An alumnus of the London School of Economics and the Tata Institute of Social Sciences, he brings rigorous academic grounding to his commentary on India's economic and policy ecosystem.
English (US) ·