Institutional vacuum exists in funds allocation to states: Y V Reddy

Former Reserve Bank of India Governor Y V Reddy Monday said that there is an institutional 'vacuum' with respect to the allocation of funds to states.

He said a formula based body like the Finance Commission, appointed once in five years and dealing with only accounts, certainly is not an adequate institution to take care of the 'inequalities' among the state.

"More recently there is no Planning Commission. There is some sort of replacement by NITI Aayog...it is not dealing with allocations to states. It is through individual ministries."


In a way there is an institutional vacuum with regard to allocation of states and union ministries have occupied the place, he said.

Reddy said there is virtually no institution which deals with distribution of transfers in aggregate, taking into consideration the requirements of all states.

Reddy was delivering a lecture at the Centre for Economic and Social Studies here.

The former RBI Governor said the Finance Commission does not address all the problems of inequalities as it does not function continuously.

To a query, he said the Centre would have to implement certain centrally sponsored schemes in either Union Territories or North Eastern States successfully before asking states to implement them.