What to Read in Indian Express Editorial( Topic and Syllabus wise)

Editorial 1 : The States Want More

Context: As states want more, the 16th Finance Commission will have to walk a tightrope on equity and efficiency

Introduction: In their suggestions to the 16th Finance Commission (FC), several states have argued in favour of increasing their share in the divisible tax pool. Some states have even called for raising the states’ share up to 50% from the current 41%.

Rationale for States’ Demand

• Reduction in Divisible Tax Pool
  • The 14th Finance Commission (FC) raised states’ share to 42%, but the 15th FC reduced it to 41% after Jammu & Kashmir’s UT status.
  • The divisible tax pool (taxes shared with states) shrank from 88.6% in 2011-12 to 78.9% in 2021-22 of the Centre’s gross tax revenue due to increased reliance on cesses and surcharges which were not shared with states.
  • States now receive only 32% of gross tax revenues on average over the past six years.
• States’ Grievances
  • Demand for a 50% share in the divisible pool to offset reduced transfers.
  • States call for limiting cesses & surcharges to ensure a larger shareable pool.

Key Considerations for the 16th Finance Commission

• Fiscal challenges for the central government.
• Quality of state expenditure.
• Equitable delivery of public services.
• Devolution to local governments.

Fiscal Challenges for the Central Government

• Current Burden
  • States already account for about 60% of general government expenditure.
  • Increasing untied transfers could strain the Centre’s fiscal capacity, especially with rising demands (e.g. defence, infrastructure).
• Centrally-Sponsored Schemes (CSS)
  • CSS are used by the Centre to fund state and concurrent list items (e.g. welfare schemes), often driven by political or developmental imperatives.
  • CSS have led to the Centre borrowing to fund transfers, as grants exceed its revenue deficit.
• Reforms Needed
  • Rationalize CSS to rebalance tied (scheme-specific) and untied (flexible) transfers.
  • Re-examine the Centre’s expenditure priorities to create fiscal space for Union-list responsibilities.

Quality of State Expenditure

• Worsening Revenue Balances
  • States like Karnataka and Punjab face rising revenue deficits. They are borrowing for subsidies, salaries, and interest payments.
  • Punjab’s fiscal deficit is driven by a high revenue deficit, limiting capital expenditure.
• Risk of Misallocation
  • Untied funds could be diverted to non-merit subsidies (e.g. power, water) or cash-transfer schemes.
  • 14 states have introduced income transfer schemes (totalling 0.6% of GDP), raising concerns about fiscal prudence.

Equitable Delivery of Public Services

• Inter-State Inequality
  • Wide disparities in spending (e.g. Bihar vs. high-income states).
  • Untied transfers may not ensure convergence in service delivery without safeguards.
• Intra-State Inequality: Lack of accountability in fund usage could exacerbate regional disparities within states.

Devolution to Local Governments

• Weak Third-Tier Governance
  • Local governments in India account for less than 5% of total spending, far below peers like China and South Africa.
  • States restrict devolution of funds and functions to municipalities and panchayats.
• Opportunity for Reform: Greater untied transfers could incentivize states to empower local bodies, but political resistance remains a barrier.

Potential Implications and Way Forward

• Balancing Fiscal Autonomy and Responsibility
  • For the Centre
    • Cap cesses and surcharges to expand the divisible pool.
    • Rationalize CSS to reduce overlapping expenditures.
  • For States
    • Link higher transfers to fiscal discipline (e.g. revenue deficit targets).
    • Mandate transparency in spending outcomes.
  • Addressing Inequality and Service Delivery
    • Introduce performance-based incentives for states to improve social sector outcomes.
    • Create a convergence fund to bridge inter-state gaps in critical areas like health and education.
  • Enhancing Local Governance Structures
    • Tie a portion of untied funds to mandatory devolution to urban and rural local bodies.
    • Strengthen accountability mechanisms for third-tier institutions.

Conclusion: The 16th Finance Commission faces a complex trade-off between states’ legitimate demand for greater fiscal autonomy and the risks of fiscal indiscipline, inequity, and misallocation. A balanced approach, limiting cesses, rationalizing CSS, and linking transfers to accountability, could address these challenges while fostering cooperative federalism.

 

Editorial 2 : A Goldilocks Moment

Context: Domestic supply position on wheat

Introduction

• Goldilocks Scenario in Wheat: Balanced market conditions with ample supply, stable prices, and sufficient government procurement.
• Rice Surplus Challenge: Excess government stocks and structural overproduction, necessitating policy shifts to address water usage and crop diversification.

Wheat Market Analysis

• Current Scenario (2023-24 vs. 2024-25)
  • Government Stocks
    • April 2024: 7.5 million tonnes (mt), lowest since 2008.
    • April 2025: 11.8 mt, improved reserves due to conservation strategies.
  • Procurement
    • Government agencies are set to procure 30 mt-plus of wheat in the current marketing season (April-June), the highest in four years.
    • During 2023-24 (April-March), open market sales of wheat from public stocks topped 10 mt.
  • Price Trends
    • wholesale prices in Delhi crossed Rs 3,200 per quintal in January 2025, as against Rs 2,500 a year ago.
    • Wheat prices in Delhi have eased to Rs 2,450-2,500 per quintal, which is an indicator of robust market arrivals.
  • Government Strategy: Conservation Over Intervention
    • Government avoided offloading stocks to cool prices, allowing market-driven price increases.
    • This resulted in higher procurement and replenished reserves.
  • Drivers of Success
    • Farm Incentives
      • MSP increased by Rs.150/quintal.
      • State bonuses: Rajasthan and Madhya Pradesh offering Rs 150-175 bonuses on top of MSP.
    • Favourable Conditions
      • Adequate soil moisture and irrigation.
      • No major weather shocks.

Rice Market Analysis

• Current Stock Status
  • April 2025 Stocks: 63.1 mt (4.5x higher than the 13.6 mt buffer requirement).
  • Structural Surplus: Rice is widely cultivated across India and is a water guzzling crop.
• Challenges
  • Environmental Concerns: Unsustainable water use in rice cultivation.
  • Market Imbalance: Overproduction crowds out crops like maize, pulses, and oilseeds which are in short supply.

Way Forward

• For Wheat: There is a need to stabilise prices and ensure procurement.
  • Sustain MSP-driven farmer engagement and climate-resilient practices.
• For Rice: There is a need to reduce cultivation and promote diversification.
  • Accelerate diversification policies to align with environmental and market needs.

Conclusion: Strategic stock conservation, farmer incentives, and favourable weather reversed supply shortages of wheat. Prices have stabilized, ensuring farmer profitability and food security. Persistent surplus of rice highlights the need for urgent policy reforms to reduce water-intensive cultivation and address crop imbalance.