Centrally Sponsored Schemes — Revision Notes

⚡ 30-Second Revision

CSS: Jointly funded (Centre & State), implemented by States.
Constitutional Basis: Primarily Article 282 (discretionary grants).
Funding Ratios: Typically 60:40 (general states), 90:10 (NE/Himalayan states).
Classification: Core of Core (MGNREGA), Core (NHM, Samagra Shiksha), Optional.
14th FC Impact: Increased state share in central taxes (42%), reduced central share in many CSS.
15th FC Impact: Maintained high devolution (41%), recommended CSS review.
NITI Aayog: Rationalised schemes (post-2015).
Challenges: Fiscal federalism tensions, conditionalities, absorptive capacity, leakage.
Reforms: Rationalisation, mergers, performance-based funding, tech integration.

2-Minute Revision

Centrally Sponsored Schemes (CSS) are a cornerstone of India's federal financial architecture, enabling the Union government to support and guide development initiatives in state subjects. Funded jointly by the Centre and states, primarily under Article 282, they aim to achieve national priorities like health, education, and rural development.

Post-2015, NITI Aayog rationalised these schemes into 'Core of Core', 'Core', and 'Optional' categories, streamlining their focus. The 14th and 15th Finance Commissions significantly impacted CSS funding by increasing states' share in central taxes, leading to a reduction in the central contribution to many schemes and fostering greater state fiscal autonomy.

Despite their crucial role, CSS face challenges such as rigid conditionalities, implementation bottlenecks, and issues of accountability. Ongoing reforms focus on enhancing flexibility, promoting outcome-based funding, and leveraging technology to improve their effectiveness and ensure equitable development across the nation.

5-Minute Revision

Centrally Sponsored Schemes (CSS) are a critical mechanism for resource transfer and policy implementation in India's federal system. They are jointly funded by the Union and State governments, with states primarily responsible for implementation, often for subjects listed in the State List.

The constitutional backing for CSS largely stems from Article 282, which permits discretionary grants for any public purpose. This distinguishes them from statutory grants under Article 275, which are primarily based on Finance Commission recommendations.

The funding patterns typically involve a 60:40 Centre-State ratio for general states and a 90:10 ratio for North-Eastern and Himalayan states, reflecting differentiated needs. Following the dissolution of the Planning Commission and the establishment of NITI Aayog in 2015, a major rationalisation exercise categorised CSS into 'Core of Core' (e.

g., MGNREGA), 'Core' (e.g., NHM, Samagra Shiksha), and 'Optional' schemes, aiming to reduce fragmentation and enhance focus. The recommendations of the 14th and 15th Finance Commissions profoundly impacted CSS.

The 14th FC's recommendation to increase states' share in the divisible pool of central taxes (from 32% to 42%) led to a reduction in the central share for many CSS, granting states greater untied fiscal space.

The 15th FC largely maintained this enhanced devolution, further advocating for a review of CSS to make them more outcome-oriented. Despite their vital role in national development, CSS grapple with implementation challenges such as rigid conditionalities, which can impinge on state autonomy, issues of absorptive capacity in states, delays in fund release, and concerns regarding leakage and accountability, often highlighted by CAG audit reports.

Reforms are continuously being pursued, focusing on greater flexibility for states, performance-based funding, scheme mergers (e.g., Samagra Shiksha), and leveraging technology for better monitoring and transparency.

Understanding CSS is essential for UPSC aspirants to grasp the complexities of fiscal federalism, Centre-State relations, and the practicalities of governance in India.

Prelims Revision Notes

1
Definition — Jointly funded by Centre & States, implemented by States.
2
Constitutional Basis — Article 282 (discretionary grants) is primary. Article 275 for statutory grants-in-aid (FC recommendations).
3
Funding Patterns — General States: 60:40 (Centre:State). NE/Himalayan States: 90:10. UTs: 100% (Centre).
4
Classification (NITI Aayog)

* Core of Core: National importance, social protection (e.g., MGNREGA, NSAP). * Core: Social empowerment, development (e.g., NHM, Samagra Shiksha, PMAY-U). * Optional: State choice, specific needs.

1
Finance Commission Impact

* 14th FC: Increased states' share in central taxes (42%), leading to reduced central share in many CSS. * 15th FC: Maintained high devolution (41%), recommended review for outcome orientation.

1
Key Schemes & Ministries — MGNREGA (MoRD), NHM (MoHFW), Samagra Shiksha (MoE), PMAY-U (MoHUA), SBM (MoDWS/MoHUA), JJM (MoJS).
2
Distinction — CSS vs. Central Sector Schemes (100% Centre funded, Centre implemented, Union List subjects).
3
Reforms — NITI Aayog rationalisation (post-2015), scheme mergers, performance-based funding, PFMS for monitoring.
4
Challenges — Conditionalities, state autonomy, matching share burden, absorptive capacity, leakage, delays.

Mains Revision Notes

1
CSS as an Instrument of Fiscal Federalism — Discuss how CSS embody both cooperative (national priorities, resource transfer) and competitive (states vying for funds, performance) aspects. Analyze the tension between national objectives and state autonomy due to conditionalities.
2
Constitutional Framework & Evolution — Explain Article 282 as the basis for discretionary grants. Contrast with Article 275. Trace the evolution from Planning Commission era to NITI Aayog's rationalisation, highlighting the shift towards greater state flexibility.
3
Impact of Finance Commissions — Analyze how 14th and 15th FC recommendations (increased untied transfers) reshaped CSS funding, leading to reduced central share and greater state responsibility. Discuss implications for state fiscal space and policy choices.
4
Implementation Challenges — Categorize challenges into:

* Fiscal: Matching share burden, delayed fund release, conditionalities. * Administrative: Low absorptive capacity, monitoring & evaluation gaps, lack of real-time data. * Governance: Leakage, corruption, accountability issues (cite CAG reports).

1
Reforms and Way Forward — Discuss NITI Aayog's rationalisation, scheme mergers (e.g., Samagra Shiksha), and the move towards outcome-based funding. Suggest measures like enhanced state consultation, greater flexibility, capacity building, and leveraging technology (DBT, PFMS) for improved effectiveness and accountability.
2
Inter-Topic Linkages — Connect CSS to Centre-State Relations , Public Finance , Poverty Alleviation , and Social Sector Schemes .

Vyyuha Quick Recall

CSS-FRIM: Funding (patterns & FC impact), Rationalisation (NITI Aayog & categories), Implementation (challenges & reforms), Monitoring (accountability & tech).