M J K THAVARAJ*
The Overdraft Problem in Perspective
THE FUNCTIONS and powers of the State Governments (Provinces) attracted considerable attention even before the Republican constitution came into vogue. As the principal actors in the freedom movement, both the Indian National Congress and the Muslim League were in favour of wider autonomy for the Provinces. This was reflected in the joint resolution which condemned the limited autonomy conceded by the Government of India Act of 1935. Most of the Provincial Governments which deposed before the Sarkar Committee1 demanded larger fiscal powers than were eventually incorported in the Constitution. In fact, the emotional upsurge which followed partition swayed the proceedings of Consembly towards greater centralisation.
The weakness of the fiscal foundation of the State Governments became obvious with every successive Plan which entailed increasing responsibility on the part of the State Governments for the provision and maintenance of infrastructural facilities, developmental programmes, social services and welfare activities. But, the Constitutional arrangements for fiscal transfers proved to be inadequate to meet the need of the States. With the given systemic constraints on resource mobilisation, the Centre has been making further inroads into the fiscal domain of the States and squeeze them of their limited resources. Basically, therefore, it is this yawning gap between need and availability of fiscal resources which is at the root of the problem of overdraft,
Overdraft is well-known in the world of commercial banking. It is a form of emergency accommodation (loan) provided by the bank to their dependable clients who arc short of cash to meet their maturing obligations. Public enterprises and government companies avail of this facility as do their counterparts in the private sector. In the case of the Central and State Governments, it is the Reserve Bank of India, as the banker of the government, which helps to fill the resource gap. As for the Government of India, this gap is covered
^Professor of Financial Administration, Indian Institute of Public Abministra-tjon. New Dellr.