State Fiscal Health: A Critical Factor for Achieving Sustainable Development Goals in India

Assessment by J-PAL Global Executive Director

A report based on statements by Iqbal Singh Dhaliwal, Global Executive Director of J-PAL at the Massachusetts Institute of Technology (MIT), indicates that the financial health of state governments is a crucial determinant for accelerating progress towards the Sustainable Development Goals (SDGs), with a particular emphasis on SDG 1 (No Poverty).

Challenges to SDG Implementation at the State Level

Significant fiscal challenges at the state level are hindering the effective implementation of the SDG agenda. Key issues identified include:

• Fiscal Constraints and SDG 1 (No Poverty): State governments are experiencing considerable financial challenges and limitations in fiscal resources. This directly impedes their ability to fund and sustain robust poverty reduction programs, which are central to achieving the targets of SDG 1.
• Inefficient Resource Allocation and SDG 17 (Partnerships for the Goals): The proliferation of government schemes, where programs launched decades ago run concurrently with new ones, leads to inefficient allocation of public funds. This practice undermines the principle of strengthening domestic resource mobilization, as outlined in SDG Target 17.1.

Strategic Recommendations for Aligning Fiscal Policy with SDGs

To enhance fiscal health and drive progress on the SDGs, the following strategic actions are recommended:

1. Rationalization of Government Schemes: A comprehensive rationalization of government schemes is required. Programs that have served their purpose should be systematically phased out. This will release vital financial resources that can be reallocated to more effectively target current SDG priorities, reflecting the principles of effective and accountable institutions under SDG 16 (Peace, Justice and Strong Institutions).
2. Promoting Productive Investment for SDG 8 (Decent Work and Economic Growth): Public funds should be channeled towards productive activities that foster sustainable livelihoods. This includes providing capital for setting up small businesses and offering working capital to support their growth. By monitoring the end-use of these funds, states can directly contribute to SDG 8 by promoting entrepreneurship and creating decent work, which in turn provides a sustainable pathway to eradicating poverty under SDG 1.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 1: No Poverty

  The article directly addresses this goal by stating that states need to improve their financial health to achieve “faster poverty reduction goals.” The entire premise of the discussion is centered on making poverty alleviation efforts more effective.

• SDG 8: Decent Work and Economic Growth

  This goal is connected through the suggestion to provide money for “productive purposes, like setting up small businesses or working capital for small businesses.” This promotes entrepreneurship and economic activity, which are key drivers for sustainable growth and poverty reduction.

• SDG 17: Partnerships for the Goals

  The article’s focus on the financial health of state governments, the need for better fiscal resources, and the “rationalisation of schemes” relates to the means of implementation for all goals. Specifically, it touches upon domestic resource mobilization and policy coherence for sustainable development.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Under SDG 1 (No Poverty):
   • Target 1.2: By 2030, reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions. The article’s central theme of achieving “faster poverty reduction goals” aligns directly with this target.
   • Target 1.a: Ensure significant mobilization of resources from a variety of sources… to implement programmes and policies to end poverty. The discussion on the poor financial health of states and the need to rationalize schemes to free up fiscal resources is directly related to mobilizing and efficiently using domestic resources for poverty programs.
2. Under SDG 8 (Decent Work and Economic Growth):
   • Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services. The specific suggestion to provide “money for productive purposes, like setting up small businesses or working capital for small businesses” is a direct reflection of this target.
3. Under SDG 17 (Partnerships for the Goals):
   • Target 17.1: Strengthen domestic resource mobilization… to improve domestic capacity for tax and other revenue collection. The article highlights that “state governments are facing considerable challenges in terms of their finances and fiscal resources,” pointing to a need to improve domestic resource management, which is a core component of this target.
   • Target 17.14: Enhance policy coherence for sustainable development. The call for “rationalisation of such schemes” and phasing out programs that have “served their purpose” is a direct call to improve policy coherence, ensuring that government actions are efficient, non-duplicative, and effective.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

The article does not mention official SDG indicators, but it implies several metrics and processes that can be used to measure progress:

• For SDG 1 (No Poverty): The phrase “faster poverty reduction” implies an indicator related to the rate of change in the national poverty headcount ratio. The suggestion to monitor “end-use” of funds implies a process indicator for the effectiveness and accountability of social protection schemes.
• For SDG 8 (Decent Work and Economic Growth): The suggestion to fund small businesses implies indicators such as the number of new small businesses established or the amount of working capital disbursed to small enterprises through government programs.
• For SDG 17 (Partnerships for the Goals): The “financial health” of state governments can be seen as a qualitative indicator of domestic resource mobilization. The “rationalisation of such schemes” is a direct, measurable policy action that can serve as an indicator for progress towards policy coherence (Target 17.14).

4. Table of Identified SDGs, Targets, and Indicators

Source: m.economictimes.com