Mint Explainer: How the transfer of funds from the Centre to states is decided

livemint.com:

₹4,05,918 crore to states for centrally sponsored schemes in 2022-23, and that it intends to raise that to ₹4,39,314 crore in the current fiscal year. The transfers under central schemes were ₹12,867 crore in 2022-23, and will rise to ₹64,172 crore this year. Transfers worth ₹1,48,098 crore were made under ‘other categories expenditure’ to states in 2022-23, which for the current year is estimated at ₹1,32,712 crore.

Such transfers were also made to union territories. Centrally sponsored schemes include MGNREGS, PM Awas Yojna, Jal Jeevan Mission, and National Health Mission. Central sector schemes include PM Kisan, Crop Insurance Scheme, Regional Connectivity Scheme, and Production Linked Incentives.

That apart, states get loans from the Centre for externally aided projects and as special assistance for capital expenditure. The budget documents show the sum of all transfers from the Centre to states and union territories at ₹18,64,615 crore for 2022-23, of which ₹9,48,406 crore, or 51%, was devolution of states’ share in central taxes. When the N.K.

Singh panel drew up the inter se shares of states in the 41% of the divisible pool based on the formula for horizontal devolution, Uttar Pradesh got 17.94% and Bihar 10.06%. Other states that got relatively large shares were Madhya Pradesh (7.85%), West Bengal (7.52%) and Maharashtra (6.32%). In contrast, among the southern states, Tamil Nadu got 4.08%, Karnataka got 3.65%, and Kerala 1.92%.

Karnataka and Kerala saw their share in the divisible pool decline from the levels recommended by the Reddy panel when the Fifteenth Finance Commission finalised its awards. Bihar and Maharashtra saw their shares rise from 9.67% and 5.52%, respectively. The shares of Karnataka fell from