Article 275

Article 275 of the Constitution of India forms a cornerstone of India’s fiscal federal structure by providing for grants-in-aid from the Union to the States. It embodies the principle of cooperative federalism and aims to address fiscal disparities among States while ensuring targeted development, particularly in areas inhabited by Scheduled Tribes and designated as Scheduled Areas.

Constitutional Objective and Scope

The purpose of Article 275 is to ensure that States facing financial deficiencies or structural economic disadvantages receive financial assistance from the Union government. This provision serves to promote balanced regional development and uphold the constitutional commitment to equality and social justice, especially for marginalised tribal communities.
Article 275, therefore, represents a blend of fiscal equity and social welfare, ensuring that the benefits of national development are shared by all regions of the country.

Key Provisions of Article 275

1. Clause (1): Grants-in-Aid to States
   • Grants-in-aid provided under this clause are charged upon the Consolidated Fund of India, ensuring constitutional protection and certainty of payment.
   • Parliament determines which States shall receive such grants and specifies the amount to be allocated.
   • Different sums may be fixed for different States, depending on their financial needs and developmental requirements.
   • A major focus is placed on development schemes for promoting the welfare of Scheduled Tribes and for advancing the administration of Scheduled Areas.
   • The provision allows Parliament to ensure that funds are used effectively for tribal welfare and administrative improvements in those regions.
2. Clause (2): Interim Power of the President
   • Until Parliament enacts specific legislation, the President of India is empowered to make provisions for the grant of financial assistance to States under this Article.
   • Any order made by the President under this clause remains subject to modification or repeal by Parliament once it makes its own provisions.
   • After the establishment of the Finance Commission, the President must take into account its recommendations before authorising such grants.

This two-tier mechanism ensures both continuity and flexibility in financial assistance, balancing executive discretion with legislative oversight.

Grants-in-Aid: Nature and Objectives

The grants under Article 275 are distinct from regular tax devolution under Article 270. While the latter distributes a share of Union tax revenues among States, Article 275 specifically targets States requiring financial assistance to meet development or administrative deficits.
Key objectives include:

• Providing budgetary support to States with revenue shortfalls.
• Financing development programmes in backward or tribal-dominated areas.
• Strengthening administrative and governance mechanisms in regions with special needs.
• Supporting infrastructure and welfare projects in Scheduled Areas.

Special Provisions for Assam and Other States

Historically, Assam received special consideration under Article 275 due to its significant tribal population and administrative challenges in hill and frontier regions. The Article provided for grants equivalent to the average excess of expenditure over revenue in such tribal areas during the period immediately preceding the Constitution’s commencement.
This approach reflected the constitutional vision of promoting the welfare of Scheduled Tribes, improving local administration, and facilitating socio-economic integration of these communities into the national framework.

Financial Mechanism and Implementation

Grants under Article 275 are financed through the Consolidated Fund of India, ensuring constitutional sanctity and non-arbitrariness in allocation. The process involves:

1. Recommendations by the Finance Commission on the quantum and distribution of such grants.
2. Presidential sanction based on the Commission’s advice.
3. Parliamentary appropriation where necessary for implementing targeted schemes.
4. Monitoring and evaluation by the Union ministries and relevant State departments to ensure proper utilisation.

This system aims to uphold transparency and accountability in intergovernmental fiscal transfers.

Focus on Scheduled Tribes and Scheduled Areas

A defining feature of Article 275 is its emphasis on Scheduled Tribes and Scheduled Areas. Funds allocated under this Article are intended to:

• Enhance education, healthcare, and livelihood opportunities for tribal populations.
• Support infrastructure development in remote and underdeveloped tribal regions.
• Improve administrative efficiency in tribal-dominated districts through schemes approved by the Union government.

The provision thus operates in tandem with the Sixth Schedule of the Constitution, which deals with the administration of tribal areas in Assam, Meghalaya, Tripura, and Mizoram.

Judicial Interpretation and Constitutional Significance

The Supreme Court of India has interpreted Article 275 in several rulings, underscoring the constitutional duty of the Union to assist States facing fiscal or developmental disadvantages. Judicial scrutiny has often centred on ensuring that grants are used for legitimate constitutional purposes and that executive discretion is not exercised arbitrarily.
Notable judicial observations include:

• The necessity of adhering to Finance Commission recommendations before granting aid.
• The recognition that Article 275 forms an integral part of the federal financial framework, promoting fiscal balance and regional equity.
• The affirmation that the President’s decisions under this Article are subject to constitutional review where questions of fairness or legality arise.

Role of the Finance Commission

Under Article 280, the Finance Commission plays a pivotal role in operationalising Article 275. It advises the President on:

• The principles governing grants-in-aid to States under Article 275(1).
• The quantum and distribution of such grants based on States’ fiscal capacities, expenditure needs, and special requirements.
• Ensuring that financial transfers are consistent with the objectives of equity and efficiency in national resource allocation.

The Commission’s recommendations, though advisory, carry considerable weight and are central to maintaining fiscal harmony between the Union and the States.

Interrelationship with Other Fiscal Provisions

Article 275 complements and interacts with several other fiscal Articles in Part XII:

• Article 270: Provides for tax devolution between the Union and the States.
• Article 281: Requires the President to present the Finance Commission’s recommendations before Parliament.
• Article 275 and the Sixth Schedule: Together, they ensure targeted financial and administrative support for tribal regions.

This network of fiscal provisions collectively reinforces the federal character of the Indian Constitution by providing both shared and targeted financial support.

Contemporary Relevance and Policy Implications

In contemporary fiscal policy, Article 275 continues to serve as a vital tool for inclusive development. Successive Finance Commissions have recommended substantial grants under this Article for:

• Bridging revenue deficits of poorer States.
• Enhancing local governance capacities in tribal and backward districts.
• Supporting welfare schemes aimed at social and economic empowerment of Scheduled Tribes.

With evolving economic conditions and the introduction of the Goods and Services Tax (GST), the framework of grants under Article 275 remains crucial for mitigating regional disparities and sustaining the fiscal autonomy of States.