Fueling viksit bharat: decoding India's modern strategy for resource mobilisation & Inclusive Growth

Introduction: Orchestrating a Trillion-Dollar Dream

Imagine orchestrating a grand symphony. You need to gather the finest musicians (resources), provide them with a world-class stage (infrastructure), and ensure every note contributes to a harmonious melody (inclusive growth). For a nation as vast and ambitious as India, Resource Mobilisation is precisely this act of masterful orchestration. It is the art and science of channeling the nation’s financial and human capital towards the overarching goal of Inclusive Growth, ensuring that the fruits of development reach every citizen.

In the contemporary context, this is intricately linked to the vision of Viksit Bharat @ 2047—transforming India into a developed nation by its 100th year of independence. This vision necessitates not just economic expansion, but sustainable and equitable progress, making the strategy for mobilizing resources more critical than ever.

Analogy: Think of resource mobilisation as the circulatory system of the economy. Taxes, investments, and savings are the lifeblood. The government and financial institutions act as the heart, pumping this blood through arteries (policies and schemes) to nourish every organ (sector) of the national body, ensuring none are left underdeveloped.

The Shifting Tectonic Plates: From Planning Commission to a New Triad

The era of the Five-Year Plans and the top-down approach of the Planning Commission has given way to a more dynamic, federal, and market-oriented framework. Today, India’s resource management architecture rests on a triad of powerful institutions:

1. NITI Aayog (National Institution for Transforming India): Replacing the Planning Commission in 2015, NITI Aayog acts as the government’s premier policy think-tank. Unlike its predecessor, it does not allocate funds but fosters cooperative and competitive federalism by advising the Centre and states, creating performance indices, and driving strategic programs like the Aspirational Districts Programme.

2. The Finance Commission: A constitutional body under Article 280, this is the primary instrument for deciding the vertical (Centre-to-state) and horizontal (among states) distribution of tax revenues. The recommendations of the 15th Finance Commission (Chair: N.K. Singh) for the 2021-26 period are currently in force. It recommended a 41% share of the divisible pool of taxes for states, adjusting 1% from the 14th FC’s 42% to account for the newly formed UTs of Jammu & Kashmir and Ladakh.

3. The GST Council: Established under Article 279A, this is a prime example of fiscal federalism in action. This body, comprising the Union Finance Minister and representatives from all states, decides on GST rates, rules, and procedures, fundamentally altering the landscape of indirect taxation and resource sharing in India.

Modern Arsenal: Key Strategies for Resource Mobilisation

India has diversified its toolkit for resource mobilisation, moving beyond conventional methods to embrace innovative and aggressive strategies.

1. Taxation Reforms: The GST Revolution

The Goods and Services Tax (GST), introduced in 2017, remains the single most significant tax reform in independent India. It has subsumed numerous central and state taxes, creating a unified common market.

• Successes: GST has significantly boosted formalization of the economy and improved tax buoyancy. Average monthly collections for FY 2023-24 stood at ₹1.68 lakh crore, a testament to its success.
• Challenges: Issues like the complex multi-slab rate structure, inverted duty structures in some sectors, and delays in the functioning of GST Appellate Tribunals persist. Recent discussions around GST 2.0 aim to simplify these structures further.

Statistic: India’s overall tax-to-GDP ratio hovers around 18%, which is considered modest compared to developed economies. The direct tax-to-GDP ratio hit a 15-year high of 6.6% in 2023-24, indicating progress in widening the tax base.

2. Asset Monetisation & Strategic Disinvestment

To unlock the value of underutilized public assets, the government has adopted a two-pronged approach:

• National Monetisation Pipeline (NMP): Launched in 2021, the NMP aims to raise ₹6 lakh crore by FY 2025 by leasing out ‘brownfield’ (existing) infrastructure assets to the private sector. The goal is not to sell the assets but to monetize them for a specific period, with ownership remaining with the government. The government expects to generate around ₹1.5 trillion through this route in FY 2024-25 alone.

• Strategic Disinvestment: This involves selling a substantial portion of government stake in select Public Sector Enterprises (PSEs) along with a transfer of management control. As per the ‘New PSE Policy for Atmanirbhar Bharat’, the government aims to maintain a ‘bare minimum’ presence in four strategic sectors and exit non-strategic ones.

3. The Big Push for Capital Expenditure (CapEx)

Recognizing that public investment is a key driver of growth, the government has significantly ramped up capital expenditure. The PM Gati Shakti National Master Plan, a digital platform integrating 16 ministries, is designed to ensure coordinated planning and execution of infrastructure projects, reducing logistical costs and time overruns. This massive infrastructure push is expected to ‘crowd in’ private investment and fuel a virtuous cycle of growth.

4. Innovative Financing: Tapping into Green Finance

To fund its ambitious climate goals, India has entered the green finance market. Sovereign Green Bonds (SGrBs) are being issued to raise funds specifically for public sector projects that reduce the economy’s carbon intensity, such as renewable energy, clean transportation, and afforestation. For the second half of FY 2024-25, the RBI plans to issue ₹200 billion in SGrBs.

Synthesizing the Channels of Resource Mobilisation

The government mobilizes resources for itself, states, the private sector, and the general public through a complex interplay of policies.

Mnemonic for 15th Finance Commission’s Horizontal Devolution Criteria: To remember the key criteria for distributing taxes among states, use the mnemonic: “I-PAT DF”

• I - Income Distance (45%)
• P - Population (2011) (15%)
• A - Area (15%)
• T - Tax & Fiscal Efforts (2.5%)
• D - Demographic Performance (12.5%)
• F - Forest & Ecology (10%)

Critical Policy Appraisal

Fun Fact: The word “Budget” originates from the Old French word “bougette,” which means a small leather pouch or bag, from which the British Chancellor of the Exchequer would traditionally take out his papers to present the government’s financial plans to Parliament.

Analytical Lens: UPSC Focus (Mains & Prelims)

• Conceptual Basis: The legal and constitutional framework for resource mobilisation is anchored in:

  • Article 280: Establishment and functions of the Finance Commission.
  • Article 279A: Constitution and mandate of the Goods and Services Tax (GST) Council.
  • The Fiscal Responsibility and Budget Management (FRBM) Act, 2003: Sets targets for the government to reduce fiscal deficits and promotes fiscal discipline.
  • Seventh Schedule: Defines the division of taxation powers between the Union and the States.

• UPSC Integration: Connecting the Dots

  1. Polity (GS-2): Directly links to Fiscal Federalism, Centre-State Financial Relations, and the role of constitutional/statutory bodies like the Finance Commission, NITI Aayog, and GST Council.
  2. Economy (GS-3): This is a core topic under ‘Indian Economy and issues relating to planning, mobilization of resources, growth, development,’ ‘Government Budgeting,’ and ‘Infrastructure.’
  3. Governance (GS-2): The end-use of mobilized resources connects to the implementation of social sector schemes, poverty alleviation, and achieving Sustainable Development Goals (SDGs).

• Future Impact & Policy Relevance: Achieving the ‘Viksit Bharat’ goal of a ~$30 trillion economy by 2047 is contingent on robust and innovative resource mobilisation. The future will demand a focus on Green Financing to manage the energy transition, finding resources for social security in an aging demographic, and leveraging technology (AI, Big Data) for more efficient tax collection and expenditure targeting. The stability of India’s fiscal federalism will be tested as states demand greater fiscal autonomy and predictable resource flows to meet their unique developmental needs.

• UPSC Prelims Practice Question (MCQ):

  Which of the following taxes was NOT subsumed under the Goods and Services Tax (GST) in India? (a) Value Added Tax (VAT) (b) Central Excise Duty (c) Basic Customs Duty (d) Service Tax

  Explanation: The Goods and Services Tax (GST) subsumed most major domestic indirect taxes like VAT, Central Excise Duty, and Service Tax. However, Basic Customs Duty, which is levied on the import of goods, was not subsumed and continues to be levied by the Central government. Therefore, option (c) is the correct answer.

• UPSC Mains Sample Question (15 Marks):

  “The paradigm of resource mobilisation in India has decisively shifted from a planned, top-down approach to a more dynamic, market-oriented framework.” Critically analyze this statement in the context of recent initiatives like the National Monetisation Pipeline and the changing roles of the Finance Commission and NITI Aayog.

Mind Map Outline (Revision Structure)

• Resource Mobilisation for Inclusive Growth
  • Core Concept: Channeling national resources towards equitable and sustainable development.
    • Link to ‘Viksit Bharat @ 2047’ vision.
    • Shift from ‘GDP as an end’ to ‘GDP as a means’.
  • Evolving Institutional Framework
    • Planning Commission (Historical Context): Top-down, five-year plans.
    • The New Triad:
      • NITI Aayog: Advisory role, cooperative federalism.
      • Finance Commission (Art. 280): Tax devolution (15th FC: 41% to states).
      • GST Council (Art. 279A): Cooperative decision-making on indirect taxes.
  • Modern Strategies for Mobilisation
    • Taxation System:
      • GST: Unification of market, improved buoyancy, challenges in rate structure.
      • Direct Taxes: Trends in Tax-to-GDP ratio.
    • Asset-Based Resources:
      • National Monetisation Pipeline (NMP): Monetising brownfield assets.
      • Strategic Disinvestment: New PSE Policy, focus on value creation.
    • Expenditure & Investment Push:
      • Capital Expenditure (CapEx): Crowding-in private investment.
      • PM Gati Shakti: Integrated infrastructure planning.
    • Innovative Financing:
      • Sovereign Green Bonds (SGrBs): Funding climate action.
  • Policy Analysis & Critique
    • Challenges:
      • Strains on Fiscal Federalism.
      • Execution risks in NMP & Disinvestment.
      • Persistently low Tax-to-GDP ratio.
    • Opportunities:
      • Digitalisation enabling formalisation.
      • Unlocking value of idle public assets.
      • Strengthening cooperative federalism via institutional forums.