Rebalancing India’s Centrally Sponsored Schemes (CSS) Framework

Centrally Sponsored Schemes have become central to India’s welfare governance, yet they continue to raise concerns over fiscal autonomy and cooperative federalism.

About Centrally Sponsored Schemes (CSS)

Meaning: Centrally Sponsored Schemes (CSS) are jointly funded Centre–State programmes implementing national development and welfare priorities.
- They cover sectors like health, education, housing, agriculture, and rural development under Union-designed frameworks.
Categories of Centrally Sponsored Schemes (CSS):
- Core of Core Schemes: Essential welfare programmes ensuring social protection and livelihood security for vulnerable groups. E.g., MGNREGA.
- Core Schemes: Development-focused schemes supporting agriculture, health, education, infrastructure, and rural development sectors. E.g., PMGSY.
- Optional Schemes: Flexible schemes implemented according to States’ regional priorities and developmental requirements. E.g., Border Area Development Programme (BADP).
Funding Pattern: Centre allocates nearly 10% budget to CSS with 60:40, 80:20, & 90:10 sharing ratios.

Scheme Expansion: India currently has over 80 CSS operated through 20+ ministries & departments.

Fiscal Burden: CSS expenditure amounts to nearly 1.5% of India’s GDP.
Transfer Dominance: CSS constitute over 50% of total transfers from the Centre to States.

Significance of Centrally Sponsored Schemes (CSS)

Welfare Delivery: Major CSS like MGNREGA, PMAY, and NHM together absorb over half of the total CSS expenditure nationwide.
National Priorities: Over 80 CSS implemented through 20+ ministries support health, education, water, housing, and rural development goals.
Regional Equity: CSS accounts for over 50% of Centre–State transfers, supporting fiscally weaker states in welfare programme implementation.
Cooperative Federalism: Shared funding models like 60:40 and 90:10 promote Centre–State coordination in implementing national development programmes.

Major Centrally Sponsored Schemes (CSS)

MGNREGA: Provides guaranteed rural employment and livelihood security through wage-based public works.
Pradhan Mantri Awas Yojana (PMAY): Aims to provide affordable housing for urban and rural poor households.
National Health Mission (NHM): Strengthens public healthcare delivery, maternal health, and primary health infrastructure across India.
Jal Jeevan Mission: Seeks to provide functional tap water connections to every rural household.
Samagra Shiksha: Promotes inclusive and quality school education from pre-primary to senior secondary levels.

Issues in CSS Framework

Fiscal Imbalance: CSS accounts for nearly 1.5% of GDP and over 50% of Centre–State transfers, limiting the fiscal autonomy of States.
Centralisation Bias: More than 80 CSS with multiple sub-schemes ignore regional diversity, weakening cooperative federalism and local effectiveness.
Scheme Proliferation: Over 200 sub-components exist across CSS, increasing administrative burden and raising implementation costs.
State Dependency: States must match funding in many schemes, increasing fiscal stress and widening disparities in development capacity.
Outcome Weakness: No scheme closure despite periodic reviews; focus remains on expenditure rather than measurable outcomes or efficiency gains.

Reforming India’s CSS Framework

Article Reorientation: Article 282 should return to residual status with transfers routed through Articles 270 and 275 via Finance Commission.
State Autonomy: No CSS for State List subjects to prevent overlap and strengthen the constitutional fiscal federalism balance.
Union Funding: Union List subjects should be fully Central Sector Schemes where “He who decides pays” ensures accountability.
Concurrent Flexibility: Concurrent List schemes should follow flexible, principle-based cost-sharing instead of a uniform one-size-fits-all implementation model.
Scheme Threshold: Only schemes above ₹500 crore annual outlay should qualify as CSS, ensuring scale, efficiency, and relevance.
Zero Budgeting: Every scheme must undergo zero-based review during each Finance Commission cycle, with renewal based on proven evidence.

“Cooperative federalism is a necessity for India’s development,” observed PM Modi; a rationalised CSS framework can strengthen states, fiscal autonomy, and inclusive governance.

Reference: Live Mint

PMF IAS Pathfinder for Mains – Question 688

Q. Centrally Sponsored Schemes have strengthened welfare delivery but increasingly constrained States fiscal autonomy and cooperative federalism. Critically analyse the structural challenges associated with CSS and suggest reforms for an outcome-oriented and federal governance framework. (250 Words) (15 Marks)

Approach

Introduction: Write a brief introduction about Centrally Sponsored Schemes.
Body: write how centrally sponsored schemes have strengthened welfare delivery, highlight structural challenges associated with CSS and suggest reforms for an outcome-oriented and federal governance framework.
Conclusion: Emphasis on an outcome-oriented CSS approach to enhance fiscal autonomy and strengthen cooperative federalism for effective governance.