RBI warned: Cooperative federalism is getting weakened by many central schemes, states are also affected

The big financial schemes of the central government are against the spirit of cooperative federalism because they affect the freedom of spending of the states. RBI has said this in the survey report released on the budget of the states. The central bank has talked about improving the financial condition of the states but for the first time, it has talked about the far-reaching financial ill-effects of centrally funded economic schemes.

RBI has also directly said that adjusting the centrally funded schemes will help in reducing the financial burden not only on the states but also on the center. This RBI report has raised an issue that many states feel but no one has spoken about it openly.

At present, the number of Centrally Sponsored Schemes (CSS) is 75 whereas in 2016, the Union Cabinet had approved 28 schemes based on the recommendations of a sub-group of Chief Ministers of the states. Then the sub-group had said that the number of CCS should not exceed 30 in any case.

According to the RBI report, “Many schemes of the Central Government affect the flexibility of spending of the state governments and the spirit of cooperative federalism erodes. If the Centrally Sponsored Schemes (CSS) are properly adjusted, then the states will have more freedom to spend in the budget, which they can use according to the special needs of their states. This will help in reducing the financial burden on both the states and the Centre.''