Maximising Centrally Sponsored Schemes: Andhra Pradesh Push for Full Central Fund Utilisation

Andhra Pradesh Chief Minister N. Chandrababu Naidu directed state departments to ensure full utilization of Centrally Sponsored Scheme (CSS) funds. Speaking at the 7th District Collectors' Conference in May 2026, he mandated a quarterly spending target of ₹8,000 crore to prevent fund lapses. In FY 2025-26, the state missed out on ₹5,051 crore due to delayed releases, under-utilization, and bill rejections via the SPARSH portal. For FY 2026-27, Andhra Pradesh aims to mobilize ₹26,020 crore under central schemes to support welfare and critical infrastructure projects amid fiscal challenges.

What Happened

Andhra Pradesh Chief Minister N. Chandrababu Naidu ordered all state departments to fully utilize Centrally Sponsored Scheme (CSS) funds. During an official review meeting on May 8, 2026, he set a strict mandate to begin spending from the first quarter. The immediate cause was a financial report revealing that the state allowed ₹5,051 crore of allocated central assistance to lapse in the previous fiscal year.

When & Where

The directive was issued during the 7th District Collectors' Conference held on May 8, 2026. The meeting took place at the State Secretariat in Velagapudi, Vijayawada. This event occurred against the backdrop of major fiscal stress in Andhra Pradesh, where maximizing central assistance is critical to balancing state welfare commitments and infrastructure needs.

Who Is Involved

Chief Minister N. Chandrababu Naidu: Chaired the conference and issued fiscal optimization directives.
State Finance Secretary D. Ronald Rose: Presented the performance review of the 79 central schemes.
District Collectors: Tasked with executing ground-level fund utilization and clearing land litigations.
Union Ministries: Responsible for releasing funds and managing the SPARSH platform.
NITI Aayog: Highlighted as a partner for securing Viability Gap Funding for public-private infrastructure projects.

How It Works

The management of central funds operates through a specific tracking mechanism:

The Union Government sanctions a budget for specific CSS programs based on shared funding ratios.
Funds are transferred into designated Single Nodal Agency (SNA) accounts to prevent diversion.
State departments execute projects and upload digital bills to the central SPARSH portal.
Departments must maintain an average expenditure of ₹8,000 crore every quarter to prevent financial blockages.

Why It Matters

This development carries deep structural importance across multiple competitive exam pillars:

Governance (UPSC GS Paper 2): Highlights administrative challenges in implementing federal public welfare programs.
Economic Impact (UPSC GS Paper 3): Under-utilization directly increases the fiscal deficit of a cash-strapped state.
Policy Importance: Showcases how procedural delays at the grassroots level can bottleneck nationwide social safety nets.

Historical Background

Centrally Sponsored Schemes have evolved significantly over the decades to drive uniform development across states. In 2015, based on the 14th Finance Commission recommendations, the Centre rationalized CSS into Core of the Core, Core, and Optional schemes. To improve transparency, the Union Government introduced the Single Nodal Agency (SNA) model in 2021. The SPARSH portal was launched subsequently to ensure digital verification and real-time tracking of public finances.

Previous Related Events

January 2026: Andhra Pradesh recorded an initial CSS expenditure of ₹12,621 crore, showcasing brief administrative momentum.
Union Budget 2024-25: The Centre increased special financial assistance allocations for Andhra Pradesh's capital development.
March 2026: Technical glitches on the central SPARSH platform led to the bulk rejection of bills worth ₹828 crore.

Static GK Connection

Article 282 of the Constitution: Grants the Union and States power to make discretionary grants for public purposes, forming the legal basis of CSS.
Fiscal Federalism: A textbook economic principle governing the financial relations and resource distribution between the Centre and States.

India & World Comparison

India employs a unique cooperative federalism model where the Centre collects major revenues and redistributes them via schemes and devolution. Unlike standard federal systems like the United States, where block grants offer massive autonomy, India uses highly regulated conditional transfers like CSS. Andhra Pradesh currently outpaces several southern peers with a Gross State Domestic Product growth rate of 12.02 percent, compared to the national baseline.

Future Impact

Policy Review: State secretaries must immediately engage with central ministries to secure fresh mother sanctions to recover rejected claims.
Infrastructure Deadlines: Full fund utilization will fast-track the execution of the PM e-Bus scheme and urban transport infrastructure by 2027.
Administrative Reform: The state will transition to a net-zero framework across welfare hostels and expedite the complete land re-survey process by March 2027.

🔑 Key Points for Revision

CM Chandrababu Naidu directed complete utilization of Centrally Sponsored Schemes.
State departments must hit an expenditure target of ₹8,000 crore every quarter.
The orders were issued during the 7th District Collectors' Conference in May 2026.
Andhra Pradesh received ₹11,465 crore out of ₹15,031 crore allocated for FY 2025-26.
The state successfully utilized ₹9,980 crore under various central initiatives.
Nearly ₹5,051 crore in central assistance lapsed due to under-utilization and rejections.
The SPARSH portal rejected claims worth ₹828 crore during March 2026.
Unspent balances of ₹438 crore were found languishing in Single Nodal Agency accounts.
Ambedkar Konaseema and West Godavari districts achieved a leading 99 percent utilization rate.
The Law and Municipal Administration departments recorded the minimum amount of lapsed funds.
The state expects to mobilize ₹26,020 crore from central schemes in FY 2026-27.
Officials must seek Viability Gap Funding from NITI Aayog for infrastructure projects.
The state received ₹8,290 crore out of ₹10,452 crore under the capital assistance scheme.
The ongoing land re-survey process in the state must be completed by March 2027.
Andhra Pradesh currently maintains an annual GSDP growth rate of 12.02 percent.
Article 282 provides the core constitutional structure for Centrally Sponsored Schemes.

🧠 Concept Link (Static GK Deep Dive)

Core Concept: Centrally Sponsored Schemes (CSS)

Definition: CSS are welfare initiatives formulated by the Union Government but implemented directly by State Governments using shared funding ratios.
Constitutional / Legal Basis: These schemes are primarily structured under Article 282 of the Indian Constitution, governing discretionary public spending.
Scientific / Economic Principle: Built on the principle of fiscal federalism, addressing vertical and horizontal financial imbalances between Centre and States.
How it connects to this event: The news covers Andhra Pradesh's administrative struggle to prevent the lapse of these shared development funds.
Origin & History: CSS originated during the early Five-Year Plans to ensure uniform national development across critical social sectors.
Key milestone 1: In 2015, the National Institution for Transforming India (NITI Aayog) rationalized CSS into 28 core sub-schemes.
Key milestone 2: The Union Finance Ministry introduced the mandatory Single Nodal Agency (SNA) account mechanism in July 2021.
Related Acts / Schemes / Treaties: Major examples include the Jal Jeevan Mission, Pradhan Mantri Awas Yojana, and PM-Poshan.
Nodal Ministry / Body: The Department of Expenditure under the Union Ministry of Finance governs the release and guidelines of CSS.
India-specific relevance: Essential for socio-economic equity, ensuring that less-developed states receive financial backing for health, education, and infrastructure.
Global comparison: Similar to categorical grants-in-aid used in the United States federal system to steer state-level policy priorities.
Data point: Andhra Pradesh failed to utilize 34 percent of its allocated funds in FY 2025-26 due to procedural bottlenecks.
Common exam angle: Examiners frequently test the difference between Central Sector Schemes (100% Union funded) and Centrally Sponsored Schemes.
Easy memory hook: Remember CSS as Centre Shares Spending with states, unlike Central Sector schemes which are fully funded by Delhi.

❓ Practice MCQs

Q1. What is the quarterly expenditure target set by the Andhra Pradesh Chief Minister for central funds?

A) ₹5,000 crore

B) ₹8,000 crore

C) ₹10,000 crore

D) ₹12,000 crore

Answer: B

Explanation: Chief Minister N. Chandrababu Naidu mandated state departments to spend an average of ₹8,000 crore every quarter to prevent capital lapses.

Q2. Which constitutional article forms the legal basis for Centrally Sponsored Schemes?

A) Article 280

B) Article 282

C) Article 324

D) Article 360

Answer: B

Explanation: Article 282 deals with discretionary grants made by the Union or States for public purposes.

Q3. Which portal was flagged by the Andhra Pradesh Finance Secretary for technical bill rejections worth ₹828 crore?

A) PFMS portal

B) SPARSH portal

C) PRAGATI portal

D) SARATHI portal

Answer: B

Explanation: The SPARSH portal rejected bills worth ₹828 crore during the last week of March 2026 due to technical errors.

Q4. Which of the following districts topped Andhra Pradesh with a 99% utilization rate of central funds in FY 2025-26?

A) Srikakulam

B) Palnadu

C) Ambedkar Konaseema

D) Eluru

Answer: C

Explanation: Ambedkar Konaseema and West Godavari districts topped the state by achieving a 99 percent utilization rate.

Q5. What is the primary difference between a Central Sector Scheme and a Centrally Sponsored Scheme?

A) Central Sector Schemes are implemented by local bodies only.

B) Centrally Sponsored Schemes feature shared funding between the Union and States.

C) Central Sector Schemes require 50% state matching funds.

D) Centrally Sponsored Schemes are funded entirely by the Union government.

Answer: B

Explanation: Centrally Sponsored Schemes are funded through a cost-sharing ratio between the Centre and States, while Central Sector Schemes are 100% funded by the Centre.

Q6. Consider the mechanism of Single Nodal Agency (SNA) accounts introduced in 2021. What is its main objective?

A) To allow states to divert central funds to regional welfare schemes.

B) To ensure real-time tracking of funds and prevent accumulation of unspent balances.

C) To eliminate the role of state departments in financial accounting.

D) To convert all Centrally Sponsored Schemes into Central Sector Schemes.

Answer: B

Explanation: The SNA platform was introduced to track public expenditure dynamically and stop funds from sitting idle without utilization.

Q7. Andhra Pradesh missed out on parts of its eligible allocation under the SASCI scheme. What does 'SASCI' stand for?

A) State Assistance for Capital Investment

B) Special Assistance to States for Capital Investment

C) Sovereign Allocation for Socio-Cultural Infrastructure

D) Systematic Aid for State Capital Infrastructure

Answer: B

Explanation: SASCI stands for Special Assistance to States for Capital Investment, under which the state received ₹8,290 crore.

Q8. Why did nearly ₹5,051 crore of central funds lapse for Andhra Pradesh in FY 2025-26

A) The Central Government completely withdrew the schemes mid-year.

B) Lapses occurred due to revised budget estimates, delayed releases, and bill rejections.

C) The State Assembly refused to pass the state budget.

D) The Comptroller and Auditor General blocked the accounts due to fraud.

Answer: B

Explanation: The financial lapse was caused by changes in budget estimates, delayed fourth-quarter central releases, and portal rejections.

📜 Previous Year Question Style (PYQ)

PYQ 1:

Regarding the financial devolution in India, what constitutes the core feature of fiscal federalism?

A) Complete financial independence of states from the Union.

B) The sharing of tax revenues and conditional grants between tiers of government.

C) The absolute right of states to collect all direct taxes.

D) The abolition of state budgets in favour of a single union budget.

Answer: B

Explanation: Fiscal federalism coordinates the division of financial responsibilities and resource sharing between central and provincial governments.

PYQ 2:

Consider the following statements:

1. The funding pattern can vary, with the Centre providing 60%, 90%, or 100% of the funds depending on the state's category.
2. They are framed on subjects mentioned exclusively in the State List of the Seventh Schedule.
3. The Single Nodal Agency (SNA) system was launched to enhance public financial transparency.

Which of the above statements is/are correct?

A) 1 only

B) 1 and 2 only

C) 1 and 3 only

D) All of the above

Answer: C

Explanation: Statements 1 and 3 are correct; CSS funding ratios vary (e.g., 60:40 or 90:10), and SNA tracks funds. Statement 2 is incorrect as CSS can cover Concurrent List items like education and health.

PYQ 3:

Assertion (A): States often fail to fully utilize the total funds sanctioned under Centrally Sponsored Schemes.

Reason (R): Delays in releasing matching state shares and technical rejections on central portals stall expenditure.

Which of the following options represents the correct dynamic?

A) Both A and R are true, and R is the correct explanation of A.

B) Both A and R are true, but R is not the correct explanation of A.

C) A is true, but R is false.

D) A is false, but R is true.

Answer: A

Explanation: Administrative delays in state matching contributions and portal errors are proven systemic reasons for fund under-utilization.

✍️ Mains Answer Pointers

Question 1 (150 words): Under-utilization of central funds hinders the performance of Centrally Sponsored Schemes (CSS). Discuss the administrative challenges leading to such capital lapses in Indian states.

Introduction: Define CSS fund flow context using recent state reports indicating significant fund lapses due to operational delays.
Body Point 1: Procedural delays in releasing matching state-share contributions because of local fiscal stress.
Body Point 2: Technological hurdles, such as sudden bill rejections on central validation portals like SPARSH.
Body Point 3: Lack of capacity at the district or local level, resulting in unspent balances accumulating in Single Nodal Agency accounts.
Conclusion: Advocate for systemic overhauls, quarterly tracking indicators, and real-time synchronization between state Treasuries and central accounts.
Data/Diagram to include: Flowchart tracing the path of a CSS fund from the Union Ministry to the Single Nodal Agency down to the Gram Panchayat.

Question 2 (250 words): Fiscal federalism in India balances the centralized collection of resources with decentralized public execution. Critically analyze the structural friction between the Centre and States regarding the execution and monitoring of central welfare allocations.

Introduction: Outline the concept of fiscal federalism under the Indian Constitution and its reliance on conditional fiscal transfers to drive nationwide development.
Body Point 1: Historical background showing the consolidation of discretionary grants under Article 282 and the rationalization of schemes by NITI Aayog.
Body Point 2: Analysis of micro-management through central platforms like SNA and SPARSH, which states argue limits regional administrative flexibility.
Body Point 3: Political dimensions where states encounter rigid rules or delayed releases during the fourth quarter of the financial year.
Body Point 4: Economic impacts on states, which must divert scarce state-own revenues to meet rigid central co-funding matching targets.
Body Point 5: Global perspective contrasting India's conditional grant system with the more autonomous block-grant systems found in other advanced federal structures.
Body Point 6: Structural challenges like unspent nodal balances, administrative litigation, and sudden rejections of state development bills.
Conclusion: Call for a cooperative federal framework that guarantees predictable fund timelines, simplified portal operations, and greater local autonomy.
Data/Diagram to include: Comparison matrix detailing differences in autonomy, funding, and monitoring between Central Sector Schemes and Centrally Sponsored Schemes.

⚠️ Examiner Trap

Trap 1: Students often confuse Centrally Sponsored Schemes with Central Sector Schemes. The correct fact is that Centrally Sponsored Schemes require states to share a portion of the cost, whereas Central Sector Schemes are 100 percent funded by the Union Government.
Trap 2: A common wrong assumption is that all funds allocated in the Union Budget are automatically spent by states. The reality is that billions of rupees lapse annually due to strict conditional parameters, missing matching state shares, and technical verification rejections.
Trap 3: Many students miss the legal basis of discretionary grants when answering questions on this topic. Always remember that CSS are financed under Article 282, not the mandatory tax devolution provisions of Article 270 or Article 275.

🧭 Exam Tip

For Prelims, examiners prefer testing the exact funding ratios (60:40 or 90:10), tracking systems (SNA, SPARSH), and the constitutional articles supporting central grants.
Mains examiners focus on the structural tension in cooperative federalism, evaluating whether tight digital monitoring safeguards public money or undermines the autonomy of states.
This topic routinely emerges in Interview rounds, where candidates are expected to offer balanced administrative solutions to improve grassroots execution without accusing either tier of government.
One high-probability prediction: The next exam cycle will likely feature a question on how real-time digital auditing platforms impact the financial autonomy of local self-governments.

For further context on fiscal discipline and regional development planning in Andhra Pradesh, you can watch this report on the Andhra Pradesh Cabinet Savings Drive Review. This video provides details on the state administration's strategy to balance public expenditure targets with responsible spending across districts.

Maximising Centrally Sponsored Schemes: Andhra Pradesh Push for Full Central Fund Utilisation

What Happened

When & Where

Who Is Involved

Chief Minister N. Chandrababu Naidu: Chaired the conference and issued fiscal optimization directives.
State Finance Secretary D. Ronald Rose: Presented the performance review of the 79 central schemes.
District Collectors: Tasked with executing ground-level fund utilization and clearing land litigations.
Union Ministries: Responsible for releasing funds and managing the SPARSH platform.
NITI Aayog: Highlighted as a partner for securing Viability Gap Funding for public-private infrastructure projects.

How It Works

The management of central funds operates through a specific tracking mechanism:

The Union Government sanctions a budget for specific CSS programs based on shared funding ratios.
Funds are transferred into designated Single Nodal Agency (SNA) accounts to prevent diversion.
State departments execute projects and upload digital bills to the central SPARSH portal.
Departments must maintain an average expenditure of ₹8,000 crore every quarter to prevent financial blockages.

Why It Matters

This development carries deep structural importance across multiple competitive exam pillars:

Governance (UPSC GS Paper 2): Highlights administrative challenges in implementing federal public welfare programs.
Economic Impact (UPSC GS Paper 3): Under-utilization directly increases the fiscal deficit of a cash-strapped state.
Policy Importance: Showcases how procedural delays at the grassroots level can bottleneck nationwide social safety nets.

Historical Background

Previous Related Events

January 2026: Andhra Pradesh recorded an initial CSS expenditure of ₹12,621 crore, showcasing brief administrative momentum.
Union Budget 2024-25: The Centre increased special financial assistance allocations for Andhra Pradesh's capital development.
March 2026: Technical glitches on the central SPARSH platform led to the bulk rejection of bills worth ₹828 crore.

Static GK Connection

Article 282 of the Constitution: Grants the Union and States power to make discretionary grants for public purposes, forming the legal basis of CSS.
Fiscal Federalism: A textbook economic principle governing the financial relations and resource distribution between the Centre and States.

India & World Comparison

Future Impact

Policy Review: State secretaries must immediately engage with central ministries to secure fresh mother sanctions to recover rejected claims.
Infrastructure Deadlines: Full fund utilization will fast-track the execution of the PM e-Bus scheme and urban transport infrastructure by 2027.
Administrative Reform: The state will transition to a net-zero framework across welfare hostels and expedite the complete land re-survey process by March 2027.

🔑 Key Points for Revision

CM Chandrababu Naidu directed complete utilization of Centrally Sponsored Schemes.
State departments must hit an expenditure target of ₹8,000 crore every quarter.
The orders were issued during the 7th District Collectors' Conference in May 2026.
Andhra Pradesh received ₹11,465 crore out of ₹15,031 crore allocated for FY 2025-26.
The state successfully utilized ₹9,980 crore under various central initiatives.
Nearly ₹5,051 crore in central assistance lapsed due to under-utilization and rejections.
The SPARSH portal rejected claims worth ₹828 crore during March 2026.
Unspent balances of ₹438 crore were found languishing in Single Nodal Agency accounts.
Ambedkar Konaseema and West Godavari districts achieved a leading 99 percent utilization rate.
The Law and Municipal Administration departments recorded the minimum amount of lapsed funds.
The state expects to mobilize ₹26,020 crore from central schemes in FY 2026-27.
Officials must seek Viability Gap Funding from NITI Aayog for infrastructure projects.
The state received ₹8,290 crore out of ₹10,452 crore under the capital assistance scheme.
The ongoing land re-survey process in the state must be completed by March 2027.
Andhra Pradesh currently maintains an annual GSDP growth rate of 12.02 percent.
Article 282 provides the core constitutional structure for Centrally Sponsored Schemes.

🧠 Concept Link (Static GK Deep Dive)

Core Concept: Centrally Sponsored Schemes (CSS)

Definition: CSS are welfare initiatives formulated by the Union Government but implemented directly by State Governments using shared funding ratios.
Constitutional / Legal Basis: These schemes are primarily structured under Article 282 of the Indian Constitution, governing discretionary public spending.
Scientific / Economic Principle: Built on the principle of fiscal federalism, addressing vertical and horizontal financial imbalances between Centre and States.
How it connects to this event: The news covers Andhra Pradesh's administrative struggle to prevent the lapse of these shared development funds.
Origin & History: CSS originated during the early Five-Year Plans to ensure uniform national development across critical social sectors.
Key milestone 1: In 2015, the National Institution for Transforming India (NITI Aayog) rationalized CSS into 28 core sub-schemes.
Key milestone 2: The Union Finance Ministry introduced the mandatory Single Nodal Agency (SNA) account mechanism in July 2021.
Related Acts / Schemes / Treaties: Major examples include the Jal Jeevan Mission, Pradhan Mantri Awas Yojana, and PM-Poshan.
Nodal Ministry / Body: The Department of Expenditure under the Union Ministry of Finance governs the release and guidelines of CSS.
India-specific relevance: Essential for socio-economic equity, ensuring that less-developed states receive financial backing for health, education, and infrastructure.
Global comparison: Similar to categorical grants-in-aid used in the United States federal system to steer state-level policy priorities.
Data point: Andhra Pradesh failed to utilize 34 percent of its allocated funds in FY 2025-26 due to procedural bottlenecks.
Common exam angle: Examiners frequently test the difference between Central Sector Schemes (100% Union funded) and Centrally Sponsored Schemes.
Easy memory hook: Remember CSS as Centre Shares Spending with states, unlike Central Sector schemes which are fully funded by Delhi.

❓ Practice MCQs

Q1. What is the quarterly expenditure target set by the Andhra Pradesh Chief Minister for central funds?

A) ₹5,000 crore

B) ₹8,000 crore

C) ₹10,000 crore

D) ₹12,000 crore

Answer: B

Explanation: Chief Minister N. Chandrababu Naidu mandated state departments to spend an average of ₹8,000 crore every quarter to prevent capital lapses.

Q2. Which constitutional article forms the legal basis for Centrally Sponsored Schemes?

A) Article 280

B) Article 282

C) Article 324

D) Article 360

Answer: B

Explanation: Article 282 deals with discretionary grants made by the Union or States for public purposes.

Q3. Which portal was flagged by the Andhra Pradesh Finance Secretary for technical bill rejections worth ₹828 crore?

A) PFMS portal

B) SPARSH portal

C) PRAGATI portal

D) SARATHI portal

Answer: B

Explanation: The SPARSH portal rejected bills worth ₹828 crore during the last week of March 2026 due to technical errors.

Q4. Which of the following districts topped Andhra Pradesh with a 99% utilization rate of central funds in FY 2025-26?

A) Srikakulam

B) Palnadu

C) Ambedkar Konaseema

D) Eluru

Answer: C

Explanation: Ambedkar Konaseema and West Godavari districts topped the state by achieving a 99 percent utilization rate.

Q5. What is the primary difference between a Central Sector Scheme and a Centrally Sponsored Scheme?

A) Central Sector Schemes are implemented by local bodies only.

B) Centrally Sponsored Schemes feature shared funding between the Union and States.

C) Central Sector Schemes require 50% state matching funds.

D) Centrally Sponsored Schemes are funded entirely by the Union government.

Answer: B

Explanation: Centrally Sponsored Schemes are funded through a cost-sharing ratio between the Centre and States, while Central Sector Schemes are 100% funded by the Centre.

Q6. Consider the mechanism of Single Nodal Agency (SNA) accounts introduced in 2021. What is its main objective?

A) To allow states to divert central funds to regional welfare schemes.

B) To ensure real-time tracking of funds and prevent accumulation of unspent balances.

C) To eliminate the role of state departments in financial accounting.

D) To convert all Centrally Sponsored Schemes into Central Sector Schemes.

Answer: B

Explanation: The SNA platform was introduced to track public expenditure dynamically and stop funds from sitting idle without utilization.

Q7. Andhra Pradesh missed out on parts of its eligible allocation under the SASCI scheme. What does 'SASCI' stand for?

A) State Assistance for Capital Investment

B) Special Assistance to States for Capital Investment

C) Sovereign Allocation for Socio-Cultural Infrastructure

D) Systematic Aid for State Capital Infrastructure

Answer: B

Explanation: SASCI stands for Special Assistance to States for Capital Investment, under which the state received ₹8,290 crore.

Q8. Why did nearly ₹5,051 crore of central funds lapse for Andhra Pradesh in FY 2025-26

A) The Central Government completely withdrew the schemes mid-year.

B) Lapses occurred due to revised budget estimates, delayed releases, and bill rejections.

C) The State Assembly refused to pass the state budget.

D) The Comptroller and Auditor General blocked the accounts due to fraud.

Answer: B

Explanation: The financial lapse was caused by changes in budget estimates, delayed fourth-quarter central releases, and portal rejections.

📜 Previous Year Question Style (PYQ)

PYQ 1:

Regarding the financial devolution in India, what constitutes the core feature of fiscal federalism?

A) Complete financial independence of states from the Union.

B) The sharing of tax revenues and conditional grants between tiers of government.

C) The absolute right of states to collect all direct taxes.

D) The abolition of state budgets in favour of a single union budget.

Answer: B

Explanation: Fiscal federalism coordinates the division of financial responsibilities and resource sharing between central and provincial governments.

PYQ 2:

Consider the following statements:

Which of the above statements is/are correct?

A) 1 only

B) 1 and 2 only

C) 1 and 3 only

D) All of the above

Answer: C

PYQ 3:

Assertion (A): States often fail to fully utilize the total funds sanctioned under Centrally Sponsored Schemes.

Reason (R): Delays in releasing matching state shares and technical rejections on central portals stall expenditure.

Which of the following options represents the correct dynamic?

A) Both A and R are true, and R is the correct explanation of A.

B) Both A and R are true, but R is not the correct explanation of A.

C) A is true, but R is false.

D) A is false, but R is true.

Answer: A

Explanation: Administrative delays in state matching contributions and portal errors are proven systemic reasons for fund under-utilization.

✍️ Mains Answer Pointers

Introduction: Define CSS fund flow context using recent state reports indicating significant fund lapses due to operational delays.
Body Point 1: Procedural delays in releasing matching state-share contributions because of local fiscal stress.
Body Point 2: Technological hurdles, such as sudden bill rejections on central validation portals like SPARSH.
Body Point 3: Lack of capacity at the district or local level, resulting in unspent balances accumulating in Single Nodal Agency accounts.
Conclusion: Advocate for systemic overhauls, quarterly tracking indicators, and real-time synchronization between state Treasuries and central accounts.
Data/Diagram to include: Flowchart tracing the path of a CSS fund from the Union Ministry to the Single Nodal Agency down to the Gram Panchayat.

Introduction: Outline the concept of fiscal federalism under the Indian Constitution and its reliance on conditional fiscal transfers to drive nationwide development.
Body Point 1: Historical background showing the consolidation of discretionary grants under Article 282 and the rationalization of schemes by NITI Aayog.
Body Point 2: Analysis of micro-management through central platforms like SNA and SPARSH, which states argue limits regional administrative flexibility.
Body Point 3: Political dimensions where states encounter rigid rules or delayed releases during the fourth quarter of the financial year.
Body Point 4: Economic impacts on states, which must divert scarce state-own revenues to meet rigid central co-funding matching targets.
Body Point 5: Global perspective contrasting India's conditional grant system with the more autonomous block-grant systems found in other advanced federal structures.
Body Point 6: Structural challenges like unspent nodal balances, administrative litigation, and sudden rejections of state development bills.
Conclusion: Call for a cooperative federal framework that guarantees predictable fund timelines, simplified portal operations, and greater local autonomy.
Data/Diagram to include: Comparison matrix detailing differences in autonomy, funding, and monitoring between Central Sector Schemes and Centrally Sponsored Schemes.

⚠️ Examiner Trap

Trap 1: Students often confuse Centrally Sponsored Schemes with Central Sector Schemes. The correct fact is that Centrally Sponsored Schemes require states to share a portion of the cost, whereas Central Sector Schemes are 100 percent funded by the Union Government.
Trap 2: A common wrong assumption is that all funds allocated in the Union Budget are automatically spent by states. The reality is that billions of rupees lapse annually due to strict conditional parameters, missing matching state shares, and technical verification rejections.
Trap 3: Many students miss the legal basis of discretionary grants when answering questions on this topic. Always remember that CSS are financed under Article 282, not the mandatory tax devolution provisions of Article 270 or Article 275.

🧭 Exam Tip

For Prelims, examiners prefer testing the exact funding ratios (60:40 or 90:10), tracking systems (SNA, SPARSH), and the constitutional articles supporting central grants.
Mains examiners focus on the structural tension in cooperative federalism, evaluating whether tight digital monitoring safeguards public money or undermines the autonomy of states.
This topic routinely emerges in Interview rounds, where candidates are expected to offer balanced administrative solutions to improve grassroots execution without accusing either tier of government.
One high-probability prediction: The next exam cycle will likely feature a question on how real-time digital auditing platforms impact the financial autonomy of local self-governments.