Role of the Centre in Fiscal Balance of States-The Case of Gujarat

The role played by the Centre through transfer of budgetary resources in determining the States’ fiscal performance is discussed with reference to Gujarat State. Over the past two decades, the State’s fiscal performance varies according to the effective period of different Finance Commissions. The Centre has first created a fiscal crisis in Gujarat and then helped the State to achieve a turn-around. The State has responded well to the Centre’s incentives. But since the Centre has not provided proper incentives, the State has failed to control its unproductive revenue expenditures which constitute a critical element in the fiscal discipline.