FM Sitharaman: No Cut in Funds to States, Release Now Tied to Delivery

Finance Minister emphasizes accountability in fund allocation to states

India, February 13, 2026, Friday, 2026

India, October 10, 2023, Tuesday, 2023

In a recent statement, Finance Minister Nirmala Sitharaman clarified the central government's stance on fund allocation to states. She emphasized that there will be no cuts in financial assistance. However, the release of these funds will now be contingent upon the states' performance and delivery of results. This shift aims to enhance accountability and ensure that funds are utilized effectively.

Sitharaman addressed concerns regarding the financial health of states during a press conference. She acknowledged the challenges faced by various state governments but reiterated that the central government remains committed to supporting them. The Finance Minister's remarks come at a time when several states have expressed apprehension about their fiscal situations.

Performance-Based Funding

The Finance Minister outlined a new framework for fund distribution. Under this framework, states will receive financial assistance based on their ability to meet specific targets. This performance-based approach is designed to encourage states to improve their governance and service delivery. Sitharaman stated that this method would foster a sense of responsibility among state governments.

She highlighted that the central government will monitor key performance indicators. These indicators will include metrics related to health, education, and infrastructure development. States that demonstrate significant progress in these areas will be prioritized for fund releases. This strategy aims to create a competitive environment among states, driving them to enhance their performance.

Fiscal Responsibility

Sitharaman also touched upon the importance of fiscal responsibility. She urged states to manage their finances prudently. The Finance Minister pointed out that many states have accumulated substantial debts. This situation poses risks not only to their financial stability but also to the overall economy.

To address these concerns, Sitharaman encouraged states to adopt better fiscal management practices. She suggested that states should focus on increasing their revenue generation capabilities. By diversifying their income sources, states can reduce their dependence on central funds. This approach will empower them to make independent financial decisions.

Support for Vulnerable States

While discussing fund allocation, Sitharaman acknowledged that some states are more vulnerable than others. She assured that the central government would continue to provide additional support to these states. This support will be in the form of grants and special assistance packages. The Finance Minister emphasized that the government is aware of the unique challenges faced by these states.

Sitharaman mentioned that the central government is committed to ensuring equitable development across the country. She reiterated that no state should feel neglected or left behind. The government aims to create a balanced approach to development, where all states can thrive.

Collaboration with States

The Finance Minister called for greater collaboration between the central and state governments. She stressed the need for open communication and cooperation. By working together, both levels of government can address pressing issues more effectively. Sitharaman believes that a collaborative approach will lead to better outcomes for citizens.

She also encouraged states to share their best practices. By learning from each other, states can implement successful strategies that have worked elsewhere. This exchange of ideas can foster innovation and improve governance across the board.

Investment in Infrastructure

Sitharaman highlighted the significance of infrastructure development in driving economic growth. She stated that the central government is committed to investing in infrastructure projects. These projects will not only create jobs but also enhance connectivity and accessibility.

The Finance Minister mentioned that states should prioritize infrastructure development in their plans. By doing so, they can attract more investments and stimulate economic activity. Sitharaman emphasized that a robust infrastructure framework is essential for sustainable growth.

Focus on Health and Education

In her address, Sitharaman underscored the importance of health and education. She noted that these sectors are critical for the overall development of the country. The Finance Minister urged states to allocate adequate resources to improve healthcare and educational facilities.

She pointed out that a healthy and educated population is vital for economic progress. By investing in these sectors, states can ensure a better quality of life for their citizens. Sitharaman believes that this investment will yield long-term benefits for both states and the nation.

Monitoring and Evaluation

To ensure the effectiveness of the new funding framework, Sitharaman announced the establishment of a monitoring and evaluation mechanism. This system will track the performance of states in real-time. It will provide valuable insights into how funds are being utilized and the outcomes achieved.

The Finance Minister stated that transparency is crucial in this process. By making data available to the public, states can be held accountable for their performance. This transparency will also foster trust between the central government and state administrations.

Addressing Concerns

Sitharaman addressed concerns raised by opposition parties regarding the new funding model. She clarified that the central government is not withdrawing support but rather enhancing accountability. The Finance Minister reiterated that the goal is to ensure that funds are used effectively for the benefit of citizens.

She acknowledged that change can be challenging but emphasized the need for a more results-oriented approach. Sitharaman believes that this shift will ultimately lead to better governance and improved public services.

In summary, Finance Minister Nirmala Sitharaman's recent statements reflect a significant shift in the central government's approach to fund allocation for states. By tying financial assistance to performance, the government aims to promote accountability and enhance service delivery. This new framework, coupled with a focus on fiscal responsibility and collaboration, is expected to drive positive change across the country.

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