Post Devolution Revenue Deficit

Context

  • Recently, the Department of Expenditure released the 2nd monthly instalment of Post Devolution Revenue Deficit (PDRD) Grant for the year 2021-22.

Key Details

  • The 15th Finance Commission has recommended Post Devolution Release Deficit grants to 17 States based on the gap between the assessment of revenue and expenditure of the State.

  • The States recommended for Post Devolution Revenue Deficit Grant are: Andhra Pradesh, Assam, Haryana, Himachal Pradesh, Karnataka, Kerala, Manipur, Meghalaya, Mizoram, Nagaland, Punjab, Rajasthan, Sikkim, Tamil Nadu, Tripura, Uttarakhand and West Bengal.

About Post Devolution Revenue Deficit Grant

  • The Centre provides the Post Devolution Revenue Deficit Grant to the States under Article 275 of the Constitution.
  • The grants are released as per the recommendations of the Finance Commission in monthly instalments to meet the gap in revenue accounts of the States post-devolution.
  • The eligibility of states to receive this grant and the quantum of the grant was decided by the Commission based on the gap between assessment of revenue and expenditure of the State after taking into account the assessed devolution for the financial year 2020-21.

Back to Basics

Article 275 of the Constitution

  • Article 275 makes provisions for statutory grants to needy states.
  • It provides for the payment of such sums as Parliament may by law provide as grants in-aid to States.
  • These are charged on Consolidated Fund of India. Such grants also include specific grants for promoting the welfare of the scheduled tribes in a state or for raising the level of administration of the scheduled areas in a state.
  • The bases of these grants are recommendations of the finance commission
  • Grants are primarily intended to correct Inter-State disparities in financial resources and to coordinate the maintenance and expansion of the welfare schemes of the State Governments on a uniform national level.

About Revenue Deficit

  • Revenue deficit arises when the government’s revenue expenditure exceeds the total revenue receipts.
  • It includes those transactions that have a direct impact on a government’s current income and expenditure.
  • This represents that the government’s own earnings are not sufficient to meet the day to-day operations of its departments.
  • Revenue deficit turns into borrowings when the government spends more than what it earns and has to resort to external borrowings.

Source: PIB

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