FINANCIAL RESOURCE DIVISION

Through the Plans

Five Year Plans : First Second Third Fourth Fifth Sixth Seventh Eighth Ninth Tenth Eleventh

1. The principal task of the Financial Resources (FR) division is to estimate the financial resources available with the Public Sector for building the economy’s productive capacity in a given span of time. Such resources are referred to as Aggregate Plan resources, which the FR division estimates for the Governments at the Center, States and Union territories with legislatures. The information on Aggregate Plan resources indicates the ability of the Public sector in directly developing the productive capacities. Without this, the necessary support required from the private sector in building the potential size of productive capacity cannot be delineated.

2. While the size of Aggregate Plan resources reflects the ability of the Public sector in building productive capacities, its sources of funding have a significant bearing on sustaining this ability. Accordingly, the FR division provides the information on both the size and composition of Aggregate Plan resources in a format referred to as the’ Scheme of Financing’ the annual or five year Plan as the case may be. The inputs necessary for making the ‘Scheme of Financing’ emerge out of periodic discussions the FR division has with the representatives of concerned Governments.

3. Some of these inputs include policy prescriptions on raising potential levels of tax and non-tax revenues, limiting borrowings and therefore interest burden to debt sustainability levels, restricting establishment and administrative expenses in favour of maintenance of capital assets and social security schemes and reducing budgetary support to commercial Public sector undertakings. The objective is to obtain that level and composition of Aggregate Plan resources, which reflects the stability of Public finances for Governments at all levels.

4. For the State Governments the ‘Scheme of Financing’ includes Central Assistance of which the Normal Central Assistance is derived on the basis of Gadgil-Mukherjee formula operated exclusively by the FR division. The formula gives due cognizance to economically disadvantaged States as also their performance in meeting specified targets of fiscal and social objectives. The FR division regularly proposes well-researched modifications of the formula for consideration of the National Development Council.

5. In obtaining fiscally sound level of Aggregate Plan resources of state Governments, the efforts of FR division is complemented by Plan-Finance-I, Department of Expenditure,. Ministry of Finance. The efforts of FR division are also supplemented by expert views which the division obtains from outside the Planning Commission. While the regular reports of Finance Commission serve as crucial inputs, the contributions of Steering Committees and Working Groups on financial resources constituted by Planning Commission in the context of five-year plans are no less significant. The officers of FR division actively participate in the deliberations of such Committees and Working-Groups drawing upon their experience of State and sectoral specific issues. In addition FR division also commissions specialized studies. Inter-alia these studies have included study on States finances, assessment of budget-based Government subsidies, reform of Public Sector Units, fiscal marks-man ship, compliance cost of direct taxes etc.

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