States' share of central taxes to go up

Govt accepts Finance Commission recommendation despite fiscal stress: Pranab

PTI | February 25, 2010



The government has, despite financial stress, accepted the 13th Finance Commission's recommendations to increase states' share of the central taxes to 32 percent, Finance Minister Pranab Mukherjee said on Thursday.

"Despite the fiscal stress being faced by the Centre, the government has accepted the major recommendations of the Finance Commission keeping in mind the larger interests of the federal polity," Mukherjee told reporters after tabling the report of the Commission in Parliament.

The Finance Commission, headed by Vijay Kelkar, has recommended raising states' shares of central taxes to 32 percent from 30.5 percent at present and an additional Rs 3.19 lakh crore as grants-in-aid over the five-year period.

The suggestions, Mukherjee said, amounted to a "substantial step up over the recommendations of the 12th Finance Commission."

Referring to the roadmap for fiscal consolidation provided by the Commission, he said, "the centre and the state governments will benefit from these recommendations."

The fiscal position of the government deteriorated following the stimulus package to the industry to help it tide over the global financial meltdown.

The fiscal deficit, the difference between total expenditure and receipts, is expected to soar to 6.8 percent of the GDP during 2009-10 from 6.2 percent a year ago.

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