Government of IndiaMinistry of Finance Budget 97-98

Budget Speech - PART A

New Devolution Formula

  1. I have already placed in the House a discussion paper on the recommendations of the Tenth Finance Commission (TFC) on the formula to be adopted for devolution of resources from the Centre to the States. The views of the States have been received. The Standing Committee of the Inter-State Council has also considered the matter. Based on these consultations, I propose to accept the recommendation of the TFC to form a single, divisible pool of taxes to be shared between the Centre and the States. To begin with, we shall adopt the proportion of 29% recommended by the TFC. This will be an improvement on the present share of the States. However, we are willing to discuss the matter further when we bring the Constitution Amendment Bill to give effect to the decision. We affirm our belief that the polity of India requires a strong Centre and strong States and, if I may add, strong local bodies.

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