The recommendations of the 14th Finance Commission, which include directing 42% of the divisible pool of Union taxes to states and providing them with more autonomy in framing policies suited for them, would cement the framework of co-operative federalism in the country, the Economic Survey 2014-15 said.
The overall change in policy structure and the creation of the NITI Aayog will further bring cities, and local bodies under the ambit of the new framework.
There will be transitional costs entailed by the reduction in transfers in central assistance to states, the survey said. “But the scope for dislocation has been minimised because the extra 14th Finance Commission resources will flow precisely to states that have the largest CAS (central assistance to states) financed schemes,” the survey said.
The commission’s projections must be treated as illustrative calculations since they are sensitive to the assumptions underlying GDP growth, revenue and expenditure estimations/projections for 2014-15 and 2015-16, the report card said.
Factors including implementation of goods and services tax (GST) and the next Pay Commission awards will further affect projections, it added.