Mains Marathon

Approach:

• Begin with a brief introduction highlighting the role of CSSs in national development and federal cooperation.
• In the body, discuss the implementation challenges, and then suggest structural and monitoring reforms with facts, examples, and recommendations.
• Conclude suitably.

Introduction:

Centrally Sponsored Schemes (CSSs), which account for over 10% of the Union Budget, serve as instruments to address national development priorities through state-level execution. However, their efficacy in promoting cooperative federalism and outcome-oriented governance depends on systemic reforms in design, funding, and monitoring.

Body:

Challenges in Current CSS Framework:

• Fragmentation of Resources: In FY 2021-22, 15 major CSSs consumed over 91% of the total CSS expenditure, leaving smaller schemes underfunded.
  • Unspent balances from previous transfers (₹1.6 lakh crore as of December 2024) highlight inefficiencies in utilizing allocated funds.
• Overcentralization: CSSs follow a ‘one-size-fits-all’ model, which fails to account for diverse socio-economic needs across states. This results in a lack of flexibility in addressing local priorities.
• Low Fiscal Absorption in Low-GSDP States: States with limited fiscal capacity, like those in low-GSDP regions, struggle with matching contributions, leading to underutilization.
  • For instance, Jal Jeevan Mission and PMAY witnessed cuts in outlays due to unspent balances amounting to ₹13,783 crore and ₹14,715 crore, respectively.
• Lack of Outcome Monitoring: Many CSSs focus on input-based indicators rather than measurable outcomes.
  • This makes it difficult to assess the actual impact of these schemes on targeted populations.
• Duplication & Inefficiency: Overlapping schemes, such as in health and education, lead to resource wastage and redundancy.

Reform Measures to Promote Cooperative Federalism & Outcome-Based Governance:

• Third-Party Evaluations: Independent evaluations, coordinated by NITI Aayog’s Development Monitoring and Evaluation Office (DMEO), can ensure accountability and outcome-based assessments of CSSs before extending their tenure beyond March 2026.
• Outcome-Linked Funding Compacts: Bilateral agreements between the Union and States should focus on measurable targets, rather than rigid input allocations.
  • This will incentivize states to perform based on outputs.
• Scheme Rationalisation: Merging redundant components and following threshold norms for new schemes, as per the Arvind Verma Committee, will reduce the multiplicity of CSSs and prevent resource fragmentation.
• Context-Specific Flexibility: Allow states to adapt CSSs to their local needs by designing sub-components, aligning with the principle of subsidiarity. This approach would ensure that schemes are tailored to local challenges.
• Inflation-Linked Budgeting: Adjust funding norms for schemes like midday meals using the Wholesale Price Index (WPI).
  • This will ensure that allocations are regularly updated to match inflation, preventing resource shortages.

Conclusion:

Reforming CSSs by addressing fragmentation, centralization, and inefficiencies will foster cooperative federalism. Implementing outcome-based governance through third-party evaluations, flexible design, and digitized systems will not only improve the effectiveness of welfare schemes but also ensure better resource allocation and accountability in the long run.