Around 80 percent of all government spending on health and education in India is done by the state governments while only 20 percent comes from the center. Yet it is the center which runs huge revenue deficits leading to dis-saving, which at the moment it stands at about 2.2 percent of GDP.
Successful state programs are routinely appropriated by the centre. States are forced to implement them with their money and staff but the entire credit is taken by the central governments.
These are some of the nuggets from a new book “India’s Fiscal Federalism', authored by former RBI Governor YV Reddy along with GR Reddy, an economist & member of the Indian Economic Service.
In an interview with CNBC-TV18, YV Reddy said, "This book is about fiscal federalism and essentially deals with imbalances, in a way its scope does not extend to all fiscal relations between Centre and States but it is relevant because it has fiscal implications."
"Cooperative Federalism means the Centre cooperates with states and the states cooperate with the Centre but every time you cannot say this is what I want and you cooperate."
"Ultimately the question is whether something has jointly arrived at programme then there would be joint ownership", said Reddy.
“So, the best way of having such national programmes is perhaps to make any such scheme a Joint Scheme of Union and States, describe it as such. Otherwise, it becomes a competition for taking credit and that is not the best way of working out a federation," he added.