Reading Comprehension Set 25

Directions (Q.1-10): Read the following passage carefully and answer the questions given below. Certain words/phrases have been printed in bold to help you locate them.

The Fourteenth Finance Commission’s recommendation to increase tax devolution to 42 per cent of the shareable pool of taxes has increased the flow of untied resources (or resources transferred without condition) to States. Estimates shows that post the 14th commission award, the untied statutory transfers would be more than 70 per cent of the aggregate resource transfers from the Union to the States. Although this increase in the share of untied funds is a marked improvement in the structure of a transfer away from a conditional to an unconditional one, it is time that attention is paid to reform the transfer system by focussing on non-Finance Commission transfer to enable States to effectively utilise the enhanced untied fiscal space. This can only be done by reforming the coverage, content and architecture of the non-Finance Commission transfers and a further consolidation of schemes. This article discusses this important issue and provides a possible way forward keeping in view the recommendations made by the 14th commission in this regard.

A major issue, post Budget 2015-16, is the sharp decline in allocations to the social sector in the form of various conditional grants to the States. This decline has happened to accommodate a large increase in tax devolution. As per the Budget estimates, enhanced tax devolution should result in an increase in the flow of untied funds to the tune of Rs.1,86,150 crore and a reduced flow of grants to the tune of Rs.87,730 crore. This decline in grants has happened in two categories: in a specified list of schemes where the Centre’s contribution has been reduced, implying a corresponding increase in contribution by the States and for a set of schemes where Central support has been withdrawn. Important schemes in the first category are the Rashtriya Krishi Vikas Yojana, the Integrated Child Development Services (ICDS), Swacch Bharat Abhiyaan and allocation for elementary education under the midday meal schemes and the Sarva Shiksha Abhiyan (SSA) financed by the Gross Budgetary Support (GBS). Major schemes delinked from Central support are the Jawaharlal Nehru National Urban Renewal Mission, the Backward Regions Grant Fund and Normal Central Assistance. The Union Budget does not provide the details of the additional contributions States have to make for schemes where Central support has been reduced. This change in the structure of grants has also to be viewed in the context of a restructuring of Centrally sponsored schemes (CSS). Despite this emphasis on restructuring and recommendations made by various committees in this regard, nothing much has happened on the ground. In fact, CSS and other conditional grants as a percentage of GDP have increased from 0.67 per cent in 2000-01 to 1.39 per cent in 2015-16. Post the 14th Commission’s recommendation, the reduction in grants to accommodate a large increase in tax devolution — of which many are CSS — is certainly a step in the right direction. However, this reduction in grants in quantum without clarity on the design, architecture and sharing pattern between the Union and States has the following implications for States: a) reducing the share of contribution of the Centre to CSS has the potential to reduce untied fiscal space available from higher tax devolution as States have to make a higher contribution to these schemes now; b) this reduction does not automatically imply that States are insulated from the conditionalities and ‘one size fits all’ CSS intervention and the uncertainties associated with CSS fund flow.

In the last decade, the proliferation of big-ticket CSS has emerged as the key fiscal strategy to transfer grants to States to achieve a certain outcome in a specific sector, especially in health, education, agriculture and rural development. Though the money allocated under CSS has declined, these schemes, if not reduced in numbers, and, in many cases, consolidated and restructured, may result in States having to fund these schemes with a higher matching contribution. And, they may have to bear the same burden of CSS conditionalities, reducing fiscal autonomy and the available untied fiscal space. Restructuring is not only important from the perspective of State finances. It is also about getting the expenditure priorities right for both the Union and the State governments. As articulated in the 14th commission’s report, “between 2002-05 and 2005-11, revenue expenditure by the Union Government on State List subjects increased from an average of 14 per cent to 20 per cent, and on Concurrent List subjects from an average of 13 per cent to 17 per cent. This implies a reduction in expenditure, in percentage terms, on Union List subjects. Expenditure functions under the Union List fall predominantly under General and Economic Services. The share of expenditure on these has progressively declined from 66.3 per cent in 2001-02 to 53.2 per cent in 2014-15(BE).” One of the primary reasons for this is the proliferation of CSS, especially in the social sector and on right-based spending. For better service delivery outcome, these need to change as most of these functions are primarily in the functional domain of the States. The Union government should move its focus from spending on overlapping functional domain to subjects thatsquarely fall in the functional domain of the Union, as in the Union List, and limit its intervention on the ‘State List’ and ‘Concurrent List’ on subjects of national priority having a consideration of externality.

Q.1. Choose and appropriate title for the passage.

1) Income-Expenditure

2) Tax and All

3) Getting Federal Transfers Rights

4) It’s All About Economy

5) No One Cares

Q.2.Which of the following is true according to the passage?

A) Post Budget 15-16, there is the sharp decline in allocations to the social sector in the form of various conditional grants to the States.

B) Major schemes delinked from Central support are the Jawaharlal Nehru National Urban Renewal Mission, Rashtriya Krishi Vikas Yojana etc.

C) Between 2002-05 and 2005-11, the revenue expenditure by Union Government on State List subjects increased from an average of 14 per cent to 20 per cent

1) All A, B and C

2) A and B

3) B and C

4) A and C

5) None is true

Q.3. What are the different schemes that is not delinked from central support?

1) Sarva Shiksha Abhiyan

2) Jawaharlal Nehru National Urban Renewal Mission

3) Backward Regions Grant Fund

4) Normal Central Assistance

5) All of the above

Q.4.What does the author suggest to the Union Government about the intervention in State or Concurrent List?

1) The author suggested the Union Govt. to take the matter seriously and act accordingly.

2) To convey clear message to states to act against the tax defaulters.

3) To reduce their interference in the domain that comes under state list and concurrent list

4) All of above

5) None of above

Q.5.What is the synonym of the word “proliferation”?

1) Assiduous

2) Apprise

3) Anarchy

4) Escalation

5) Ambivalence

Q.6.What does the author mean by the phrase “limit its intervention on the ‘State List’ and ‘Concurrent List’”?

1) Govt. should Intervene the states whenever there is something wrong that a state cannot handle.

2) Should check the amount of interference in states jurisdictions and common jurisdictions.

3) Should limit the revenue expenditure in the matters of State and Concurrent List.

4) Should be concerned about the happenings in the country.

5) None of these

Q.7.What is the synonym of the word “squarely”, according to the passage?

1) Entirely

2) Square in shape

3) Craven

4) conundrum

5) None of these

Q.8.What is the synonym of the word “predominantly”?

1) preponderantly

2) Mainly

3) Primarily

4) All of the above

5) None of these

Q.9. What is the antonym of the word “elementary”?

1) Basic

2) Rudimentary

3) Fundamental

4) All of the above

5) None of these

Q.10. What is the antonym of the word “devolution”?

1) Decentralisation

2) Transfer

3) Surrender

4) All of the above

5) None of the above


1. 3
2. 4
3. 1
4. 3
5. 4
6. 2
7. 1
8. 4
9. 5
10. 5

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